Company Quick10K Filing
Insight Enterprises
Price53.05 EPS5
Shares36 P/E12
MCap1,911 P/FCF11
Net Debt694 EBIT234
TEV2,605 TEV/EBIT11
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-02-17
10-Q 2020-09-30 Filed 2020-11-03
10-Q 2020-06-30 Filed 2020-08-06
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-21
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-02-22
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-02-26
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-10-31
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-20
10-Q 2014-09-30 Filed 2014-10-30
10-Q 2014-06-30 Filed 2014-08-01
10-Q 2014-03-31 Filed 2014-05-02
10-K 2013-12-31 Filed 2014-02-21
10-Q 2013-09-30 Filed 2013-10-31
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-02
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-03
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-02-23
10-Q 2010-09-30 Filed 2010-11-04
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-06
10-K 2009-12-31 Filed 2010-02-25
8-K 2020-11-03
8-K 2020-09-17
8-K 2020-08-06
8-K 2020-05-20
8-K 2020-05-15
8-K 2020-05-07
8-K 2020-02-26
8-K 2020-02-18
8-K 2020-02-12
8-K 2019-12-12
8-K 2019-11-06
8-K 2019-10-16
8-K 2019-08-30
8-K 2019-08-21
8-K 2019-08-15
8-K 2019-08-12
8-K 2019-08-12
8-K 2019-08-09
8-K 2019-08-06
8-K 2019-06-24
8-K 2019-05-22
8-K 2019-05-01
8-K 2019-02-14
8-K 2018-09-12
8-K 2018-08-01
8-K 2018-06-27
8-K 2018-05-10
8-K 2018-05-02
8-K 2018-03-23
8-K 2018-02-14
8-K 2018-02-12

NSIT 10K Annual Report

Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10 - K Summary
EX-21 nsit-ex21_6.htm
EX-23.1 nsit-ex231_9.htm
EX-24.1 nsit-ex241_19.htm
EX-24.2 nsit-ex242_8.htm
EX-24.3 nsit-ex243_11.htm
EX-24.4 nsit-ex244_7.htm
EX-24.5 nsit-ex245_20.htm
EX-24.6 nsit-ex246_18.htm
EX-24.7 nsit-ex247_12.htm
EX-24.8 nsit-ex248_16.htm
EX-31.1 nsit-ex311_15.htm
EX-31.2 nsit-ex312_14.htm
EX-32.1 nsit-ex321_13.htm

Insight Enterprises Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
4.03.22.41.60.80.02012201420172020
Assets, Equity
2.01.61.20.80.40.02012201420172020
Rev, G Profit, Net Income
0.80.50.2-0.1-0.4-0.72012201420172020
Ops, Inv, Fin

nsit-10k_20201231.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

X/

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2020

or

/   /

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to ___________.

Commission File Number: 0-25092

 

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware

86-0766246

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

6820 South Harl Avenue, Tempe, Arizona 85283

(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (480) 333-3000

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $0.01

NSIT

The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

n/a

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes

X

No

 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Yes

 

No

X

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes

X

No

 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

 

Yes

X

No

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

X

 

Accelerated filer

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  /  /

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. /X/

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

Yes

 

No

X

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock as reported on The Nasdaq Global Select Market on June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was $1,692,113,608.

The number of shares outstanding of the registrant’s common stock on February 12, 2021 was 35,103,074.

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant’s Proxy Statement relating to its 2021 Annual Meeting of Stockholders have been incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K. 

 

 


INSIGHT ENTERPRISES, INC.

 

ANNUAL REPORT ON FORM 10-K

Year Ended December 31, 2020

 

TABLE OF CONTENTS

 

 

 

 

Page

PART I

ITEM 1.

Business

 

3

ITEM 1A.

Risk Factors

 

15

ITEM 1B.

Unresolved Staff Comments

 

25

ITEM 2.

Properties

 

26

ITEM 3.

Legal Proceedings

 

27

ITEM 4.

Mine Safety Disclosures

 

27

 

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

27

ITEM 6.

Selected Financial Data

      

29

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

31

ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

 

46

ITEM 8.

Financial Statements and Supplementary Data

 

47

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

91

ITEM 9A.

Controls and Procedures

 

91

ITEM 9B.

Other Information

 

91

 

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

 

92

ITEM 11.

Executive Compensation

 

92

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

92

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

 

92

ITEM 14.

Principal Accountant Fees and Services

 

92

 

PART IV

ITEM 15.

Exhibits and Financial Statement Schedules

 

93

ITEM 16.

Form 10-K Summary

 

93

EXHIBITS TO FORM 10-K

 

95

SIGNATURES

 

98

 

 

 

 


INSIGHT ENTERPRISES, INC.

 

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K, including statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may include: projections of, and matters that affect, net sales, gross profit, gross margin, operating expenses, earnings from operations, non-operating income and expenses, net earnings or cash flows, cash needs and the payment of accrued expenses and liabilities; our future responses to and the potential impact of coronavirus strain COVID-19 (“COVID-19”) on our Company; the expected effects of seasonality on our business; expectations of further consolidation and trends in the Information Technology (“IT”) industry; our business strategy and our strategic initiatives, including our efforts to grow our core business in the current environment, develop and grow our global cloud business and build scalable solutions; expectations regarding partner incentives; our expectations about future benefits of our acquisitions and our plans related thereto, including potential expansion into wider regions; our expectations, including expected synergies, from the PCM integration; the increasing demand for big data solutions; the availability of competitive sources of products for our purchase and resale; our intentions concerning the payment of dividends; our acquisition strategy; our ability to offset the effects of inflation and manage any increase in interest rates; projections of capital expenditures; our plans to continue to evolve our IT systems, including migration of EMEA’s current system; the sufficiency of our capital resources, the availability of financing and our needs or plans relating thereto; the effects of new accounting principles and expected dates of adoption; the effect of indemnification obligations; projections about the outcome of ongoing tax audits; our expectations regarding future tax rates; adequate provisions for and our positions and strategies with respect to ongoing and threatened litigation and expected outcomes; our ability to expand our client relationships; our expectations that pricing pressures in the IT industry will continue; our plans to use cash flow from operations for working capital, to pay down debt, repurchase shares of our common stock, make capital expenditures, and fund acquisitions; our belief that our office facilities are adequate and that we will be able to extend our current leases or locate substitute facilities on satisfactory terms; our belief that we have adequate provisions for losses; our expectation that we will not incur interest payments under our inventory financing facilities; our expectations that future income will be sufficient to fully recover deferred tax assets; our exposure to off-balance sheet arrangements; statements of belief; and statements of assumptions underlying any of the foregoing.  Forward-looking statements are identified by such words as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will,” “may” and variations of such words and similar expressions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.  Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.  There can be no assurances that results described in forward-looking statements will be achieved, and actual results could differ materially from those suggested by the forward-looking statements.  Some of the important factors that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following, which are discussed in “Risk Factors” in Part I, Item 1A of this report:

 

 

actions of our competitors, including manufacturers and publishers of products we sell;

 

our reliance on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and the requirements year over year;

 

the duration and severity of the COVID-19 pandemic and its effects on our business, results of operations and financial condition, as well as the widespread outbreak of any other illnesses or communicable diseases;

 

general economic conditions, economic uncertainties and changes in geopolitical conditions;

 

changes in the IT industry and/or rapid changes in technology;

 

supply constraints for devices;

 

accounts receivable risks, including increased credit loss experience or extended payment terms with our clients;

 

our reliance on independent shipping companies;

 

the risks associated with our international operations;

 

natural disasters or other adverse occurrences;

 

disruptions in our IT systems and voice and data networks;

1


INSIGHT ENTERPRISES, INC.

 

 

cyberattacks or breaches of data privacy and security regulations;

 

intellectual property infringement claims and challenges to our registered trademarks and trade names;

 

legal proceedings, including PCM related litigation, client audits and failure to comply with laws and regulations;

 

failure to comply with the terms and conditions of our commercial and public sector contracts;

 

exposure to changes in, interpretations of, or enforcement trends related to tax rules and regulations;

 

our substantial amount of indebtedness;

 

the conditional conversion feature of our convertible senior notes (the “notes”), which if triggered, may adversely affect the Company’s financial condition and operating results;

 

the accounting method for convertible debt securities that may be settled in cash, such as the notes, could have a material effect on the Company’s reported financial results;

 

the Company is subject to counterparty risk with respect to the convertible note hedge transactions;

 

risks associated with the discontinuation of LIBOR as a benchmark rate.

 

increased debt and interest expense and availability of funds under our financing facilities;

 

possible significant fluctuations in our future operating results as well as seasonality and variability in client demands;

 

our dependence on certain key personnel;

 

risks associated with the integration and operation of acquired businesses, including achievement of expected synergies and benefits; and

 

future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock.

Any forward-looking statements in this report are made as of the date of this filing and should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others.  Additionally, there may be other risks described from time to time in the reports that we file with the Securities and Exchange Commission (the “SEC”).  We assume no obligation to update, and, except as may be required by law, do not intend to update, any forward-looking statements.  We do not endorse any projections regarding future performance that may be made by third parties.

 

 

 

2


INSIGHT ENTERPRISES, INC.

 

 

PART I

Item 1.  Business

Our Company

 

Today, every business is a technology business.  Insight Enterprises, Inc. (“Insight” or the “Company”) empowers organizations of all sizes with Intelligent Technology SolutionsTM and services to maximize the business value of IT 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, and connected workforce solutions, together with our supply chain optimization expertise, we help clients innovate and optimize their operations to run smarter.    

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

 

Operating Segment*

 

Geography

 

Percent of 2020

Consolidated Net Sales

 

North America

 

United States and Canada

 

79%

 

EMEA

 

Europe, Middle East and Africa

 

19%

 

APAC

 

Asia-Pacific

 

2%

 

 

 

*

Additional detailed segment and geographic information can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and in Note 19 to the Consolidated Financial Statements in Part II, Item 8 of this report.  

Insight began operations in Arizona in 1988, incorporated in Delaware in 1991 and completed its initial public offering in 1995.  Our corporate headquarters are located in Tempe, Arizona.  From our original location in the United States, we expanded nationwide and then entered Canada in 1997 and the United Kingdom in 1998.  Through a combination of acquisitions and organic growth, we continued to increase our geographic coverage and expand our technical capabilities.  Our acquisitions were as follows:

Prior to 2015 we acquired Software Spectrum, Inc. (2006), Calence, LLC (2008), MINX Limited (2008), Ensynch, Inc. (2011), Inmac GmbH (2012) and Micro Warehouse BV (2012).

Our acquisitions from 2015 through today were as follows:  

 

2015 – Acquired BlueMetal Architects, Inc. (“BlueMetal”), an interactive design and technology architecture firm, and strengthened our digital innovation services capabilities in the area of application design, mobility and big data;

 

2016 – Acquired Ignia, Pty Ltd (“Ignia”), and expanded our global footprint in the areas of application design, digital solutions, cloud, mobility and business analytics, while also building on our ability to bring digital innovation solutions to our clients in APAC;

 

2017 – Acquired Datalink Corporation (“Datalink”) and strengthened our position as a leading IT solutions provider with deep technical expertise delivering data center transformation solutions to clients on premise or in the cloud.  Additionally, we acquired Caase Group B.V. (referred to herein as, “Caase.com”) and strengthened our ability to deliver cloud solutions to our clients in EMEA;

 

2018 – Acquired Cardinal Solutions Group, Inc. (“Cardinal”), a digital solutions provider and strengthened our digital innovations capabilities;

 

2019 – Acquired PCM, Inc. (“PCM”), a provider of multi-vendor technology offerings, including hardware, software and services which complemented our supply chain optimization solution offering, adding scale and clients in the mid-market and corporate space primarily in North America; and

 

2020 – On February 28, 2020, we acquired vNext SAS (“vNext”), a French digital consulting services and managed services provider, increasing our capacity to deliver consulting and implementation services to support clients’ digital transformation initiatives to our clients in EMEA.

 

3


INSIGHT ENTERPRISES, INC.

 

 

Our Purpose and Values

 

Our purpose: We build meaningful connections to help businesses run smarter.  We live by our core values of hunger, heart and harmony, which set the tone for our business and define who we are.  

 

Our core values are:

 

Hunger – Our insatiable desire to create new opportunities for our clients and our business is apparent in everything we do.

 

Heart – We seek to have a positive impact in the lives of the people we serve by putting our clients, partners and teammates first.

 

Harmony – We invite perspective, and we consistently celebrate each other’s unique contributions as we work together to bring the best solutions to our clients.

We believe that these values strengthen the overall Insight experience for our clients, partners, and teammates (we refer to our customers as “clients,” our suppliers as “partners” and our employees as “teammates”).    

Our Market

The worldwide total addressable market for information technology is forecasted to be $3.8 trillion according to Gartner, a leading IT research and advisory company.  Based on our analysis of Gartner market data, we believe the top 10 most comparable global solution providers represent less than 20% of the worldwide total addressable market.  We believe our addressable worldwide market represents approximately $700 billion in annual sales and for the year ended December 31, 2020, our net sales of $8.3 billion represented approximately 1% of that highly diverse market.  We believe that we are well positioned in this highly fragmented global market with locations in 19 countries and our deep experience delivering IT solutions across the globe.  

Our Value Proposition

At Insight, we build meaningful connections to help businesses run smarter.

As a Fortune 500-ranked global technology provider, we empower organizations of all sizes with secure Insight Intelligent Technology Solutions™ and services to help our clients maximize the value of their technology today — and prepare for tomorrow.

Delivering client value, which helps us earn client loyalty, is our primary goal. We expect our clients to achieve long-standing advantages by leveraging our unique capabilities to provide end-to-end secure digital transformation solutions and services. From IT strategy and design to implementation and management, we meet clients wherever they are now, and work alongside them to get them where they want to be.

Insight has a differentiated investment and solution development strategy. Through organic investment and strategic acquisitions, we’ve developed scale and innovative solutions in three primary areas: Digital Innovation, Cloud and Data Center Transformation, and Connected Workforce. Underpinning these core solution areas is our pervasive security capability and our legacy, global, at-scale supply chain optimization systems and tools.

 

Insight’s Strategic Assets are a Platform for Growth

 

Culture, people and leadership – We have many teammates on one global team who live by our core values; we show hunger, heart and harmony in everything we do. We put people first, believing that technology can connect people in powerful ways.

 

Innovation led solution area expertise

 

o

Next-generation tech skills – We quickly adapt to new technology trends and innovation, investing internally to advance our technical capabilities while at the same time often making strategic acquisitions that establish us as thought leaders, with scale and reach, around emerging market trends.  Annually, we gather thought leaders from our technical

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INSIGHT ENTERPRISES, INC.

 

 

expert pool to share best practices through peer led learning sessions.  The BlueMetal (2015, U.S.), Ignia (2016, Australia), Cardinal (2018, U.S.) and vNext (2020, France) acquisitions are examples of acquisitions that have given us global capabilities to support our clients as they look to accelerate in the digital world.

 

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Data center transformation skills – In support of our long-term strategy, we acquired Datalink (2017, U.S.), a provider of IT services, cloud and enterprise data center solutions and Caase.com (2017, Netherlands), a cloud solutions provider. These acquisitions added deep technical expertise and complementary services offerings to our internally developed solutions and increased our addressable market opportunity in hybrid cloud and other high-growth data center categories.

 

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App development and Internet-of-Things (“IoT”) expertise – We were recognized as Intel’s Innovation Partner of the Year in 2020 and IoT Partner of the Year in 2019 as well as named partner of the year by app development solution providers HashiCorp and Databricks in 2020. We also were named in The Forrester Wave™: Midsize Agile Software Development Service Providers, Q2 2019 and The Forrester New Wave™: Computer Vision Consultancies, Q4 2020 reports. That expertise combined with our hardware and software expertise, makes us well-positioned to deliver holistic connected product and IoT solutions.

 

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Software DNA – We understand complex software licensing requirements and have the know-how to optimize our clients’ usage and compliance management through a portfolio of license consulting and optimization services.

 

Global reach and scale – We have the capabilities to serve clients across the globe with hardware, software provisioning and related services, and with integrated technology solutions in multiple countries directly or through our partner network.  With the 2019 acquisition of PCM, Insight grew to over 11,000 teammates worldwide, serving over 150,000 clients spanning our client categories.

 

Diverse partner relationships – We have a multi-partner approach and have deep relationships with leading product manufacturers, software publishers and distribution partners, as well as emerging cloud and other technology partners, to service our global portfolio of commercial and public sector clients with the integrated IT solutions that make the most sense for their IT environments.

 

Operational rigor and financial health – We offer efficient supply chain execution, as well as product fulfillment, logistics capabilities, management tools and technical expertise.  We also have a track record for successfully integrating mergers and acquisitions to accelerate growth.

Our Business Strategy

 

A client’s information technology services needs span an array of business priorities including modern infrastructure and cloud options, workforce productivity initiatives, and leveraging IT to differentiate from their competitors.  We believe our solution areas effectively represent the areas that our clients care about most and are designed to allow our clients, and the different decision makers within our clients’ organizations, to interact with us in multiple ways. Whether implementing public cloud or as-a-service workplace solutions, designing a next generation or hybrid cloud data center, or leveraging sophisticated IoT and artificial intelligence solutions to improve our clients’ experiences, we provide technical expertise and advisory services to our clients as a single solution integrator, powered by decades-long partner relationships and expertise to supply them the hardware, software and cloud services required to support their technology needs.

Our go to market framework for our solution areas is built on over 30 years of broad IT experience combined with strategic acquisitions, new services development and deep partner relationships. We are uniquely positioned to help our clients maximize the values of their technology today – and prepare for tomorrow.  


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Our expertise is deep across our solutions areas, underpinned by our supply chain optimization expertise:

Digital Innovation

We help companies navigate their digital transformation journey end-to-end. From custom app development and effective data analytics to Agile training and change management, we’re the partner to take business to the next level.

Cloud and Data Center Transformation

We help businesses modernize and secure critical platforms to transform IT. Through end-to-end services from architecture through management, we help leverage the right platforms to increase agility and support innovation.

Connected Workforce

We help organizations keep their employees connected, productive and secure with professional and managed services that maximize returns on IT investments and free up internal resources.

Supply Chain Optimization

All three of our solution areas are supported by the foundation of our technology supply chain optimization tools and services, which are designed to help maximize our client’s IT investments by streamlining the IT procurement process and simplifying management over their hardware and software assets.

 

Each of our solution areas represents a discrete area of growth for our business and when connected to each other, they provide a platform for our clients to leverage our breadth of expertise to solve their most relevant business challenges.  Our strategy is to increase our penetration with new and existing clients within the solution areas across our geographic footprint in North America, EMEA and APAC. Powered by Insight’s legacy supply chain expertise, we are able to support our services offerings within the hardware, software and cloud solutions from market-leading and emerging manufacturer brands.  To execute our strategy, we employ centralized and field-based sales, engineering, and services resources to connect with our clients.  We also have invested in approximately 3,700 technical engineers, architects and software developers who create and deliver integrated IT solutions to our clients globally, an asset that we believe differentiates us in the marketplace.  

 

Our unique solution area go to market strategy is supported by a strong operational platform that includes scalable IT and e-commerce systems and processes, robust digital marketing capabilities, and a culture of continuous business process transformation and automation.  

 

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E-commerce and Cloud Management Systems – In recent years, cloud and as-a-service solutions have become more mainstream and adoption continues to increase across markets and verticals.  Key market imperatives in the adoption of these solutions are speed to market, flexibility, scalability and availability.  We have invested in, and will continue to invest in, technical tools and resources to provide clients with the assessment, migration, integration and managed services required to simplify the cloud adoption decision, whether that decision results in a private, public or hybrid cloud environment.

 

We also continue to invest in our global e-commerce platform, which serves as a single marketplace for our clients to buy and manage anything from a discrete product offering to their cloud and other as-a-service subscriptions.  Components of our e-commerce platform include:

 

Customizable client portals, primarily in North America, which allow clients to streamline procurement and processes through a self-service online tool, drive standardization and optimize reconciliation.

 

A focus on small to medium-sized clients, providing them with the ability to learn, solve, buy, and manage cloud products and services via our online experience.  

 

A similar online experience and capabilities for our larger enterprise clients with added IT as-a-service broker capabilities allowing larger IT organizations to centrally provide cloud offerings while maintaining the manageability and visibility they require.

 

Digital Marketing Enablement – We have invested in internal industry and marketing expertise to develop original go to market and IT solution content, whitepapers and industry research studies to ensure we enable our clients with relevant information around IT and business trends.  Further, we leverage a best-in-class digital marketing technology stack to personalize the delivery of our content through an omni-channel experience.  Our integrated suite of digital marketing tools has allowed us to access and grow our position in the mid-market over the past few years while also growing our marketing alignment with our partners.

 

Culture of Business Transformation and AutomationAt the heart of our culture is an intense desire to improve our clients’ experience when doing business with us either on the web, through business to business connections or on the telephone.  We have a dedicated business transformation team focused on end to end process improvement initiatives around order flow, dynamic pricing and cost optimization, and back office operations, all oriented to the impact on client experience.  We have invested in process automation and optical recognition scanning solutions to improve certain of our client facing processes, making the buying experience more frictionless while improving the scalability of our business processes for the long term.

Our Offerings

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 consist of largely software and certain software-related services.  On a consolidated basis, hardware, software and services represented approximately 61%, 25% and 14%, respectively, of our net sales in 2020.  This compares to 60%, 27% and 13%, respectively, of our net sales in 2019 and 61%, 27% and 12%, respectively, of our consolidated net sales in 2018.  Additional detailed sales mix information by operating segment can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and in Note 19 to the Consolidated Financial Statements in Part II, Item 8 of this report.  

Services Solutions Offerings

 

We have developed solutions that integrate hardware, software and cloud-solution-based services to help businesses run smarter within our key solutions areas.  Our core solutions include:

 

Digital Innovation – Our clients are looking for business outcomes and we know the best experience wins, whether they are trying to improve their customer engagement, enable their workforce, or improve their operations, our clients face strong competition and digital disruption throughout their industries.  We help our clients leverage technology to digitally transform their businesses.  Our digital innovation solutions build upon our deep expertise in public cloud, IoT,

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mobility, big data and artificial intelligence as well as our extensive project management and organizational change management capabilities to ensure success across our clients’ digital transformation journeys.  

 

Intelligent Endpoints: Gaining intelligent insights to network enabled devices, and spotting patterns and trends through mass analysis of any type of endpoints.  We leverage our intellectual property or our partners’ solutions to build out artificial intelligence aware IoT solutions.

 

Intelligent Applications: Starting with digital design and ideation sessions on the art of the possible, we build custom applications to help our clients create disruption.  These applications are increasingly cloud-based and mobile-centric.

 

Modern Applications: Custom-developed mobile, cloud and IoT applications.  Typically, these applications are specific to the client vertical market, e.g., healthcare, financial services or retail.

 

Big Data & Analytic: Custom-developed solutions to help clients quickly review actionable insights within their data, including artificial intelligence for prediction, optimization, cognitive and vision services.  Various solutions that have been developed include: drones to inspect railroad tracks and wind farms, predictive analytics to drive health outcomes and optimization models that replicate physical spaces virtually to run millions of simulations to drive agility, efficiencies, and desired outcomes.

 

Our Digital Innovation team has been named a strong performer in The Forrester New WaveTM: Computer Vision Consultancies, Q4 2020.  Forrester evaluated 13 of the top computer vision (“CV”) providers across 10 criteria to help application development and delivery professionals, line-of-business and IT executives select the right partner for their CV needs.  Insight was recognized for its deployment of innovative CV solutions at the edge.  Our Digital Innovation team also has won numerous partner awards for innovation, AI Mobile Application, and DevOps/Cloud.

 

Cloud and Data Center Transformation – Consumption-based models and technology convergence

are reinventing decades-old approaches to IT infrastructure. We assess, align, manage and secure our clients’ data and workloads, defining and executing platform strategies for optimized IT environments. Our end-to-end services empower companies to effectively leverage technology solutions to overcome challenges, support growth and innovation, reduce risk, and transform the business.

 

 

Data center and cloud transformation: Modernizing and optimizing IT across the business. Our services span hybrid cloud, migration and consolidation, workload-platform alignment, converged/hyperconverged solutions, and software-defined data center.

 

Data platform modernization: Improving how data is stored, protected, consumed, analyzed and restored. We address data protection, backup to cloud — independent software vendor, business continuity and disaster recovery, artificial intelligence/machine learning private infrastructure and graphics processing unit acceleration, and data security.

 

Integrated network and security: Securing networks and data, including cloud. Our focus areas are security operations and controls, compliance and governance, cloud security, micro-segmentation, and software-defined networking in a wide area network and SD fabric.

 

Comprehensive services:  Our consulting services, professional services, managed services and support services help clients throughout transformation, with advisory, technical needs, 24/7/365 monitoring, residencies and more.

 

Connected Workforce – The consumerization of IT, increase in the millennial population and proliferation of alternate work models is transforming the workplace.  COVID-19 accelerated these changes in our clients.  We provide our clients’ workforces with solutions to deliver consumer-like technology experiences, enhance employee productivity, and reduce total cost of ownership.  We offer a full range of services to clients including discovery, transformation, adoption and management.  We deliver secure, managed solutions in three domains:

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Digital Workspace: Desktop, notebook, tablet and mobile devices coupled with cloud-based productivity and collaboration software, provisioned and deployed in a “as-a-service” model and remotely managed by Insight.

 

Workplace Services: Full support of end users and their technology including virtual technical support, remote service desk and automated self-service.

 

Enhanced Product Lifecycle: Ability to procure, stage, provision, manage and dispose of hardware assets including overnight “hot-swap” to enable remote workers.

 

Supply Chain Optimization – As mentioned earlier, our three solution areas are supported by the foundation of our technology supply chain optimization tools and services.  Growing pressure on IT budgets and increasing trends in outsourcing of non-core functions are changing the way clients approach procurement and management of core IT investments.  We provide end-to-end lifecycle services around hardware and software that help our clients optimize their IT return on investments.

 

Hardware Life Cycle: Source, procure, stage, configure, integrate, test, deploy, refurbish and redeploy IT products spanning endpoints to infrastructure, regionally, or across the globe via the Insight footprint and an engaged network of suppliers.

 

Software Life Cycle: Portfolio management, compliance, integration and adoption, on premise or in the cloud, regionally or across the globe.

 

Hardware Warranty and Software Maintenance: Warranty and maintenance services covering an array of products that can be purchased as a point solution or as a managed service delivered by Insight.

Hardware Product Offerings  

We offer products from hundreds of manufacturers, including such industry leaders as Cisco, Dell/EMC, HP Inc., Lenovo, Hewlett Packard Enterprise Company (“HPE”), NetApp, Apple, Microsoft and IBM.  Our scale and purchasing power, combined with our efficient, high-volume and cost effective direct sales and marketing model, allow us to offer competitive prices.  We believe that offering choices from multiple partners enables us to better serve our clients by providing a variety of product solutions to address their specific business needs.

In addition to our distribution facilities, we have “direct-ship” programs with many of our partners, including manufacturers and distributors, allowing us to expand our product offerings without increasing inventory, handling costs or inventory warehousing risk exposure.  As a result, we are able to offer billions of dollars of products in virtual inventory in fulfilling our performance obligations to our clients.  Convenience and product options among multiple brands are key competitive advantages compared to manufacturers’ direct selling programs, which are generally limited to their own brands and may not offer clients a complete or best-in-class solution across all product categories.

Software Product Offerings

 

Our clients acquire software applications from us in the form of licensing agreements with software publishers or boxed products.  We offer products from hundreds of publishers, including such industry leaders as Microsoft, VMware, Adobe, IBM Software, Symantec and Citrix.  

As software publishers choose different models for implementing licensing agreements, businesses must evaluate the alternatives to ensure that they select the appropriate agreements and comply with the publishers’ licensing terms when purchasing and managing their software licenses.  With many publishers now offering public cloud-based software solutions in place of licenses consumed on premise, we expect we will continue to see migration to the cloud-based software alternatives discussed above in our services offerings.

Our Information Technology Systems

We have committed significant resources to the IT systems that we own and use to manage our business and believe that our success is dependent upon our ability to provide prompt and efficient service to our clients based on the accuracy, quality and utilization of the information generated by our IT systems.  Because these systems affect our ability to manage our sales, client service, partner relationships and programs, distribution, inventories and accounting systems and our voice and data

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networks, we have built redundancy into certain systems, maintain system outage policies and procedures and have comprehensive data backup.  We are focused on driving improvements in sales productivity through upgraded IT systems to support higher levels of client satisfaction and new client acquisition, as well as garnering efficiencies in our business.  

We operate under a single, standardized IT system across North America and APAC and a separate, single IT system platform in all countries in our EMEA operations.  We have completed the integration of the PCM business to our IT system platforms.  In 2021 we plan to migrate our EMEA operations to the same IT system used in North America and APAC.

For a discussion of risks associated with our IT systems, see “Risk Factors – Risks related to Our Technology, Data and Intellectual Property – Disruptions in our IT systems and voice and data networks could affect our ability to service our clients and cause us to incur additional expenses,” in Part I, Item 1A of this report.

Our Competition

 

The IT hardware, software and services industry is very fragmented and highly competitive.  Our competition includes:

 

 

Solution providers, value-added resellers and direct marketers such as CDW, Zones, Connection, SHI, Softchoice, Systemax, Computacenter, Bechtle, SoftwareONE, and Crayon;

 

Systems integrators such as ePlus, Presidio, World Wide Technology, Perficient and Accenture;

 

Specialty retailers, aggregators, distributors, and to a lesser extent, national computer retailers, computer superstores, Internet-only computer providers, consumer electronics and office supply superstores and mass merchandisers;

 

Product manufacturers, such as Dell, HP Inc., IBM, Lenovo and HPE;

 

Software publishers, such as IBM, Microsoft and Symantec;

 

National and global service providers, such as IBM Global Services and HP Enterprise Services; and

 

E-tailers, such as Amazon Web Services, Newegg, Rakuten and e-Buyer (United Kingdom).

The competitive landscape in the industry is continually changing as various competitors expand their product and services offerings.  In addition, emerging models such as cloud computing are creating new competitors and opportunities in messaging, infrastructure, security, collaboration and other services offerings, and, as with other areas, we compete both with resellers and directly with manufacturers, publishers or other service providers for many of these offerings.  Many of our manufacturer and publisher partners are also our competitors, as many sell directly to business customers, particularly larger corporate customers.

For a discussion of risks associated with the actions of our competitors, see “Risk Factors – Risks related to Our Business, Operations and Industry – The IT hardware, software and services industry is intensely competitive, and actions of our competitors, including manufacturers and publishers of products we sell, can negatively affect our business,” in Part I, Item 1A of this report.  

Our Partners

We partner with market leaders offering the top technology brands as well as emerging entrants in the marketplace.  During 2020, we purchased products and software from approximately 6,000 partners.  Approximately 64% (based on dollar volume) of these purchases were directly from manufacturers or software publishers, with the balance purchased through distributors.  Purchases from Microsoft and Tech Data (a distributor) accounted for approximately 21% and 11%, respectively, of our aggregate purchases in 2020.  No other partner accounted for more than 10% of purchases in 2020.  Our top five partners as a group for 2020 were Microsoft, Tech Data, Dell, Ingram Micro (a distributor) and Cisco Systems, and approximately 56% of our total purchases during 2020 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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During 2020, sales of Microsoft and Dell products accounted for approximately 19% and 14%, respectively, of our consolidated net sales.  No other manufacturer’s or publisher’s products accounted for more than 10% of our consolidated net sales in 2020.  Sales of product from our top five manufacturers/publishers as a group (Microsoft, Dell, Cisco Systems, HP Inc. and Lenovo) accounted for approximately 57% of our consolidated net sales during 2020.

We obtain incentives from certain product manufacturers, software publishers and distribution partners based typically upon the volume of sales or purchases of their products and services.  In other cases, such incentives may be in the form of participation in our partner programs, which may require specific services or activities with our clients, discounts, marketing funds, price protection or rebates.  Manufacturers and publishers may also provide mailing lists, contacts or leads to us.  We believe that these incentives (or partner funding) and other marketing assistance allow us to increase our marketing reach and strengthen our relationships with leading manufacturers and publishers.  

We are focused on understanding our partners’ objectives and developing plans and programs to grow our mutual businesses.  We have invested in our digital marketing capabilities over the past four years.  These digital marketing investments increase the effectiveness of our marketing campaigns and client interactions.  We believe that we are emerging as a leader in our industry in digital marketing, delivering an outstanding service experience to our clients.  We implemented business intelligence tools that enable us to track performance in this area and demonstrate the return on our partners’ investments with us.  We measure partner satisfaction regularly and hold quarterly business reviews with our largest partners to review business results from the prior quarter, discuss plans for the future and obtain feedback.  Additionally, we host annual partner forums in North America, EMEA and APAC to articulate our plans for the upcoming year.

As we move into new service areas, we may become even more reliant on certain partner relationships.  For a discussion of risks associated with our reliance on partners, see “Risk Factors – Risks related to Our Business, Operations and Industry – We rely on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and the requirements year over year,” in Part I, Item 1A of this report.

Our Teammates

Successful execution of our business strategy and strategic initiatives involves attracting, developing and retaining teammates who share our core values: hunger, heart and harmony.  The experience, knowledge and dedication of our teammates help drive our operating results.  Management regularly evaluates and enhances internal processes, technologies and teammate benefits in order to maintain engaged teammates and drive client satisfaction, productivity and efficiency.  

Various ways that we attract, develop and retain qualified and motivated teammates include:

 

 

Insight continues to make strides in becoming an employer of choice and has received honors all around the globe. Some examples include: Forbes World’s Best Employers 2020 Number 296 overall and number 27 for IT companies; Number 70 on the Fortune 100 Best Workplaces for Diversity list (2019); Great Place to Work U.K. Number 8; Forbes Best Employers of Veterans (2020), Phoenix Best Places to Work Number 5 – Phoenix Business Journal (2020); Fortune Most Admired Company (2020); Human Rights Campaign Foundation’s 2021 Corporate Equality Index scoring of 95; and an employer of choice by Fortune placing #7 in the information technology services industry on the list of the World’s Most Admired Companies (2021).

 

Insight offers robust leadership training for all people managers.  Our training is centered around our Leadership Commitments requiring that leaders:  (1) Create clarity; (2) Inspire people; (3) Demonstrate thought leadership; and (4) Deliver results.  We believe leaders who excel in these commitments heighten teammate satisfaction and deliver superior business results.

 

An important part of the Company’s culture is its commitment to diversity and inclusion, and we’ve been recognized for our dedication to this important area. Insight has supported four Teammate Resource Groups, which represent various diverse groups of teammates and

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consist of approximately 1,200 active members.  Those four groups hosted more than 70 events in 2020 and highlighted the concerns of diverse teammates at the Company.

 

Our Teammate Pulse Survey has ranked Diversity as our #1 scoring category for the past three years.  In the Fortune Best Workplaces process, we learned that “Justice” was rated as the highest category by our teammates – the extent to which employees perceive that management promotes inclusive behavior, avoids discrimination, and is committed to providing fair appeal.

 

Our leaders carefully review and monitor our Teammate Pulse Survey results year over year and create action plans to increase teammate engagement.  We have seen positive trending over the last five years, and are proud of the culture at Insight.

 

To support teammates and their families in crisis situations, the Company provides financial support through its charitable foundation, which has received millions in contributions over the last six years from Insight and its teammates.

 

Insight offers all teammates two paid Heart Days annually to volunteer their time to charitable organizations in the communities where we live and work.

As of December 31, 2020, we employed 11,006 teammates.  Our teammates by operating segment were as follows:

 

Operating Segment

 

Number of Teammates

 

North America

 

 

8,719

 

EMEA

 

 

1,875

 

APAC

 

 

412

 

Our teammates in the United States are not represented by a labor union.  Our workforces in certain foreign countries, such as the Netherlands, have worker representative committees or work councils with which we maintain strong relationships.  We believe our relations with our teammates are good, and we have never experienced a labor related work stoppage.  

Our teammates by job function were as follows:

 

Job Function

 

Number of Teammates

 

Sales

 

 

3,380

 

Skilled, certified consulting and service delivery professionals

 

 

4,410

 

Total client facing teammates

 

 

7,790

 

Management, support services and administration

 

 

2,820

 

Distribution

 

 

396

 

For a discussion of risks associated with our dependence on certain personnel, including sales personnel, see “Risk Factors – General Risk Factors – We depend on certain key personnel,” in Part I, Item 1A of this report.

Our Seasonality

We experience some seasonal trends in our sales of hardware, software and services.  For example:

 

software sales are typically higher in our second and fourth quarters, particularly the second quarter;

 

business clients, particularly larger enterprise businesses in the United States, tend to spend more in our fourth quarter and less in the first quarter;

 

sales to the federal government in the United States are often stronger in our third quarter, while sales in the state and local government and education markets are stronger in our second quarter; and

 

sales to public sector clients in the United Kingdom are often stronger in our first quarter.

These trends create overall seasonality in our consolidated results such that sales and profitability are expected to be higher in the second and fourth quarters of the year.  

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Our Backlog

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.

Our Intellectual Property

We do not maintain a traditional research and development group, but we do seek to establish and protect our intellectual property through different forms of intellectual property protection, including trademarks, patents, copyrights, trade secrets and other protections that apply in the United States and select foreign countries where we believe it is appropriate to seek such protection, under applicable laws.  We also seek to maintain our trade secrets and confidential information by non-disclosure policies and agreements, as applicable, with teammates, clients, partners and others to protect our intellectual property rights.  There can be no assurance, however, that the rights obtained can be successfully enforced against infringers in every jurisdiction. Although we believe the protection afforded by our trademarks, patents, copyrights and trade secrets has value, the rapidly changing technology in our industry and uncertainties in the legal process makes our future success dependent primarily on the innovative skills, technological expertise and management abilities of our employees. Our principal trademark is a registered mark, and we also license certain of our proprietary intellectual property rights to third parties.  We have registered a number of domain names, applied for registration of other marks in the United States and in certain international jurisdictions, and, from time to time, filed patent applications.  We believe our trademarks, in particular, have significant value, and we continue to invest in their promotion and protection.

For a discussion of risks associated with our intellectual property, see “Risk Factors – We may not be able to protect our intellectual property adequately, and we may be subject to intellectual property infringement claims,” in Part I, Item 1A of this report.

Information about our Executive Officers

The following are our current executive officers:

Glynis A. Bryan, Chief Financial Officer, Age 62

Ms. Bryan joined Insight in December 2007 as our Chief Financial Officer.  Prior to joining Insight, Ms. Bryan served as Executive Vice President and Chief Financial Officer at Swift Transportation Co., Inc. from April 2005 to May 2007. Prior to joining Swift, Ms. Bryan served as Chief Financial Officer at APL Logistics in Oakland, California and in various finance roles at Ryder System, Inc., including Chief Financial Officer of Ryder’s largest business unit, Ryder Transportation Services. Ms. Bryan is a member of the board of directors and the audit committee of Pentair, Ltd., a diversified industrial manufacturing company and of Pinnacle West Capital Corporation. In January 2018, she was appointed to the Economic Advisory Council for the Federal Reserve Bank of San Francisco.

Samuel C. Cowley, Senior Vice President, General Counsel and Secretary, Age 60

Mr. Cowley joined Insight in June 2016 as our Senior Vice President and General Counsel.  Prior to joining Insight, Mr. Cowley served as General Counsel and Vice President, Business Development of Prestige Brands Holdings, Inc., a company that markets and distributes over-the-counter healthcare products, from February 2012 to June 2016. He previously served as Executive Vice President, Business Development and General Counsel of Matrixx Initiatives, Inc. and Executive Vice President and General Counsel of Swift Transportation Co., Inc. Prior to that, he practiced law in the business and finance groups with the law firms of Snell & Wilmer and Reid & Priest.

Rachael A. Bertrandt Crump, Principal Accounting Officer and Global Corporate Controller, Age 45

Ms. Bertrandt Crump joined Insight in December 2016 as Vice President of Finance, Controller – North America and was appointed Principal Accounting Officer and Global Corporate Controller in September 2018.  Ms. Bertrandt Crump is a Certified Public Accountant. She began her career in public accounting in 1997 with Ernst & Young LLP. Ms. Bertrandt Crump has held controller positions with several multinational companies in the software, medical services and semiconductor industries. Prior to joining Insight, Ms. Bertrandt Crump served as the Senior Director Controller, Global

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Accounting at Amkor Technology, Inc., a semiconductor product packaging and test services provider, from 2006 to 2016.

Emma de Sousa, President – Insight EMEA, Age 44

Ms. de Sousa joined Insight in 2003.  Ms. de Sousa has held various positions of increasing responsibility at Insight including Managing Director of the United Kingdom and Ireland from January 2009 to March 2017, and Senior Vice President of United Kingdom and EMEA Marketing from March 2017 until January 2021, when she was promoted to President of the EMEA business.  Prior to joining Insight, Ms. de Sousa held various marketing and sales roles.

Helen K. Johnson, Senior Vice President, Finance – Chief Financial Officer, North America, Age 51

Ms. Johnson joined Insight in October 2007 as Senior Vice President, Treasurer and on January 1, 2013, assumed the role of Chief Financial Officer of our North America operating segment.  In her current role, Ms. Johnson is responsible for all finance functions in our North America business. She is also responsible for corporate financial planning and analysis and investor relations activities of the Company. Prior to joining Insight, Ms. Johnson served from 2000 to 2007 at eFunds Corporation, a publicly-held technology solutions provider to the financial institutions market, most recently as Senior Vice President, Treasurer and Investor Relations.

Kenneth T. Lamneck, President and Chief Executive Officer, Age 66

Mr. Lamneck was appointed President and Chief Executive Officer and a director of Insight effective January 1, 2010.  From 2004 through 2009, Mr. Lamneck served as President, the Americas, at Tech Data Corporation, a wholesale distributor of technology products, where he led operations in the United States, Canada and Latin America. From 1996 to 2003, he held various executive management positions at Arrow Electronics, including President of Arrow/Richey Electronics and President of Arrow’s Industrial Computer Products business. Mr. Lamneck is a member of the board of directors of Benchmark Electronics, Inc., a publicly-held company that provides integrated manufacturing, design and engineering services to original equipment manufacturers of computers and related products.

Joyce Mullen, President, North America Region, Age 58

Ms. Mullen joined Insight in October 2020 as our President of the North America Region.  Prior to joining Insight, Ms. Mullen spent 21 years of her career at Dell Technologies in a variety of sales, service delivery, and IT solutions roles.  Ms. Mullen also serves on the Board of The Toro Company (NYSE: TTC). She completed her undergraduate studies at Brown University in International Relations, and she holds an MBA from Harvard University.

Jeffery Shumway, Chief Information Officer, Age 62

Mr. Shumway joined Insight September 2005 as a consulting information systems analyst.  Mr. Shumway held various positions of increasing responsibility at Insight including Vice President of Application Development from August 2010 to September 2017 and Senior Vice President of Global IT Operations from October 2017 until May 2019, when he was promoted to Global Chief Information Officer.  Prior to joining Insight, Mr. Shumway held a variety of leadership positions at Belden Communications.  Prior to starting his career in the field of information technology, Mr. Shumway served as a Phoenix, Arizona Police Officer, holding many roles including Sergeant of the Computer Services Bureau.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the reports filed pursuant to Section 16(a) of the Exchange Act are available free of charge on our web site at www.insight.com, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.  The information contained on our web site is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K.  

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Item 1A.  Risk Factors

 

Risks Related to Our Business, Operations and Industry

 

The IT hardware, software and services industry is intensely competitive, and actions of our competitors, including manufacturers and publishers of products we sell, can negatively affect our businessCompetition in the industry is based on price, product availability, speed of delivery, credit availability, quality and breadth of product lines, and, increasingly, on the ability to provide services and tailor specific solutions to client needs.  Many of our manufacturer and publisher partners are also our competitors, as many sell directly to business customers, particularly larger corporate customers.  In addition to the manufacturers and publishers of products we sell, we compete with a large number and wide variety of providers and resellers of IT hardware, software and services.  We believe our industry will see further consolidation as product resellers and direct marketers combine operations or acquire or merge with other resellers, service providers and direct marketers to increase efficiency, service capabilities and market share.  Moreover, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their product and service offerings.  Accordingly, it is possible that new competitors or alliances among competitors may emerge and acquire significant market share. 

 

The competitive landscape in which we operate continues to change as new technologies are developed.  While innovation helps our business as it creates new offerings for us to sell, it can also disrupt our business model and create new and stronger competitors.  For instance, while cloud-based solutions present an opportunity for us, cloud-based solutions and technologies that deliver technology solutions as-a-service could increase the amount of sales directly to customers rather than through solutions providers like us, or could reduce the amount of hardware or software we sell, leading to a reduction in our sales and/or profitability.  Accordingly, we are dependent on continued innovations by our current vendor partners and our ability to partner with new and emerging technology providers.  

 

Generally, pricing is very aggressive in the industry, and we expect pricing pressures to continue.  There can be no assurance that we will be able to negotiate prices as favorable as those negotiated by our competitors or that we will be able to offset the effects of price reductions with an increase in the number of clients, higher net sales, cost reductions or higher sales of services, which are typically at higher gross margins, or otherwise.  Price reductions by our competitors that we either cannot or choose not to match could result in an erosion of our market share and/or reduced sales or, to the extent we match such reductions, could result in reduced operating margins or inventory impairment charges, any of which could have a material adverse effect on our business, financial condition and results of operations.

Some of our competitors in each of our operating segments may have greater technical, marketing and other resources than we do.  In addition, some of these competitors may be able to respond more quickly to new or changing opportunities, technologies and client requirements.  Many current and potential competitors also may have greater name recognition and engage in more extensive promotional activities, offer more attractive terms to their customers and adopt more aggressive pricing policies than we do.  Additionally, some of our competitors have higher margins and/or lower operating cost structures, allowing them to price more aggressively.  There can be no assurance that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.  

 

We rely on our partners for product availability, competitive products to sell and marketing funds and purchasing incentives, which can change significantly in the amounts made available and the requirements year over year.  We acquire products for resale both directly from manufacturers and publishers and indirectly through distributors, and the loss of a significant partner relationship could cause a disruption in the availability of products to us.  There can be no assurance that manufacturers and publishers will continue to sell or will not limit or curtail the availability of their product to resellers like us.  The loss of, or change in business relationship with, any of our key vendor partners could negatively impact our business.  

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In addition, certain manufacturers, publishers and distributors provide us with substantial incentives in the form of rebates, marketing funds and other investments, purchasing incentives, early payment discounts, referral fees and price protections (collectively, “partner funding”).  Partner funding is used to offset, among other things, inventory costs, costs of goods sold, marketing costs and other operating expenses.  Certain of these funds are based on our volume of sales or purchases, growth rate of net sales, increases in client usage, or purchases and marketing programs.  If we do not meet the goals of these programs or if we are not in compliance with the terms of these programs, there could be a material negative effect on the amount of incentives offered or paid to us by manufacturers and publishers.  We continue to experience adverse partner funding program changes that reduce the incentives many partners make available to us and that change the requirements for earning such incentives.  If we are unable to react timely to remediate and respond to these changes in partner funding programs of publishers and manufacturers, including the elimination of, or significant reductions in, funding for some of the activities for which we have been compensated in the past, the changes could have a material adverse effect on our business, financial condition and results of operations.  This is especially true in connection with the incentive programs of our largest partners: Microsoft, Dell, Cisco Systems, HP Inc. and Lenovo. There can be no assurance that we will continue to receive such incentives in the future

 

The recent novel coronavirus (“COVID-19”) global pandemic has adversely impacted, and is expected to continue to adversely impact, our business, results of operations and financial condition.  The widespread outbreak of any other illnesses or communicable diseases could also adversely affect our business, results of operations and financial condition.

 

We could be negatively impacted by the widespread outbreak of an illness, any other communicable disease or any other public health crisis that results in economic and trade disruptions, including the disruption of global supply chains.  To date, the COVID-19 pandemic has adversely impacted, and is expected to continue to adversely impact, our business, results of operations and financial condition.  

 

In late 2019, there was an outbreak of a new strain of coronavirus, COVID-19, which has since spread globally.  On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.  In an effort to protect the health and safety of our teammates, we took proactive action to adopt social distancing policies at our locations globally, including working from home where possible, limiting the number of teammates attending in-person meetings, reducing the number of people in our locations at any one time, and suspending teammate travel.

 

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation, and initially created significant volatility and disruption of financial markets.  As a result of the COVID-19 pandemic and the related responses from government authorities, our business operations, financial performance and results of operations have been, and continue to be, adversely impacted. For example, we observed a pronounced impact of COVID-19 on our 2020 financial results when compared to internal expectations and anticipate demand for our products and services may continue to be impacted going into 2021 as clients continue to evaluate the impact of COVID-19 on their businesses, their profitability and their liquidity. While we experienced a decline in hardware bookings year over year in the first half of 2020, we exited 2020 with elevated bookings going into the first quarter of 2021. In the short run we took steps to accelerate and complete our integration with PCM and to reduce discretionary operating expenditures, such as certain teammate benefits and variable compensation, and travel related expenditures.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Impact of COVID-19 to our Business” for additional information.

 

Additionally, our business operations, financial performance and results of operations have been and could be further adversely impacted in a number of ways, which may include, but is not limited to, the following:

 

 

disruptions to our operations, including any closures of our offices and facilities; restrictions on our operations and sales, marketing and distribution efforts; and interruptions to our other important business activities;

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further reduced demand for our products and services due to disruptions to the businesses and operations of our clients;

interruptions, availability or delays in global shipping to transport our products;

a slowdown or stoppage in the supply chain for our products;

 

limitations on employee resources and availability, including due to sickness, government restrictions, the desire of employees to avoid contact with large groups of people or mass transit disruptions;

the ability of our clients to pay for our products, services and solutions;

 

the willingness of clients in the travel, hospitality, retail and other industries significantly impacted by the pandemic to continue with current and expected projects;

 

a fluctuation in foreign currency exchange rates or interest rates, which could result from market uncertainties;

 

an increase in the cost or the difficulty to obtain debt or equity financing, which could affect our financial condition or our ability to fund operations or future investment opportunities;

changes to the carrying value of our goodwill and intangible assets; and

 

an increase in regulatory restrictions or continued market volatility, which could hinder our ability to execute strategic business activities, including acquisitions, as well as negatively impact our stock price.

 

The spread of COVID-19 has caused us to modify our business practices (including teammate travel, teammate work locations, and cancellation of physical participation in most meetings, events and conferences), and we anticipate taking further actions as may be required by government authorities or that we determine are in the best interests of our clients, partners and teammates. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed. Further, should any key teammates become ill from COVID-19 and unable to work, the attention of the management team could be diverted.

 

The potential effects of the COVID-19 pandemic may also impact our other risk factors discussed in this “Risk Factors” section. The ultimate extent of the impact of the COVID-19 pandemic on our business operations, financial performance and results of operation, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted.  This includes, but is not limited to, the duration and spread of the COVID-19 pandemic, its severity, the actions taken to contain the virus or treat its impact, such as restrictions on travel and transportation, and how quickly and to what extent normal economic and operating conditions can resume.

 

General economic conditions, including unfavorable economic conditions in a particular region, business or industry sector, may lead our clients to delay or forgo investments in IT hardware, software and services.  Weak economic conditions generally or any broad-based reduction in IT spending, including as a result of the COVID-19 pandemic, adversely affects our business, operating results and financial condition.  A prolonged slowdown in the global economy or similar crisis, or in a particular region or business or industry sector, or tightening of credit markets, could cause our clients to have difficulty accessing capital and credit sources, delay contractual payments, or delay or forgo decisions to upgrade or add to their existing IT environments, license new software or purchase products or services (particularly with respect to discretionary spending for hardware, software and services).  Such events could have a material adverse effect on our business, financial condition and results of operations.  Economic or industry downturns could result in longer payment cycles, increased collection costs and defaults in excess of our expectations.  A significant deterioration in our ability to collect on accounts receivable could also impact the cost or availability of financing under our accounts receivable securitization program.

 

Our sales to public sector clients are also impacted by government spending policies, government shutdowns, budget priorities and revenue levels.  An adverse change in government spending policies (including budget cuts at the federal, state and local level), budget priorities or revenue levels could cause our public sector clients to reduce their purchases or to terminate or not renew their contracts with us.  These possible actions or the adoption of new or modified procurement regulations or practices could have a material adverse effect our business, financial position and results of operations.

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Political developments, economic instability or natural disasters impacting international trade, including continued uncertainty surrounding the Referendum on the United Kingdom’s Membership in the European Union (“EU”) (referred to as “Brexit”) and, trade disputes and increased tariffs, particularly between the United States and China, may negatively impact markets and cause weaker macroeconomic conditions or drive sentiment that weakens demand for our products and services.  Potential adverse consequences of Brexit such as global market uncertainty, volatility in currency exchange rates, greater restrictions on imports and exports between the United Kingdom and EU countries and increased regulatory complexities could have a negative impact on our business, financial condition and results of operations.

 

Changes in the IT industry and/or rapid changes in technology may reduce demand for the IT hardware, software and services we sell or change who makes purchasing decisions for IT hardware, software and services.  Our results of operations are influenced by a variety of factors, including the condition of the IT industry, shifts in demand for, or availability of, IT hardware, software, peripherals and services, and industry innovation and the introduction of new products and technologies.  The IT industry is characterized by rapid technological change and the frequent introduction of new products and changing delivery channels and models, which can decrease demand for current products and services and can disrupt purchasing patterns.  If we fail to react in a timely manner to such changes, we may experience lower sales and, with respect to hardware, we may have to record write-downs of obsolete inventory.  In addition, in order to satisfy client demand, protect ourselves against product shortages, obtain greater purchasing discounts and react to changes in original equipment manufacturers’ terms and conditions, we may decide to carry inventory of products that may have limited or no return privileges.  There can be no assurance that we will be able to avoid losses related to inventory obsolescence on these products.  Additionally, if purchasing power within our clients shifts from centralized procurement functions to business units or individual end users and we are unable to react timely to any such changes, these shifts in purchasing power could have a material adverse effect on our business, financial conditions and results of operations.

The cloud and “as-a-service” models are transforming the IT market and introducing new products, services and competitors to the market.  In many cases, these new distribution models allow enterprises to obtain the benefits of commercially licensed, internally operated software with less complexity and lower initial set-up, operational and licensing costs, which increases competition for us.  There can be no assurance that we will be able to adapt to, or compete effectively with, current or future distribution channels or competitors or that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.

We are exposed to accounts receivable risks.  We extend credit to our clients for a significant portion of our net sales, typically on 30-day payment terms.  We are subject to the risk that our clients may not pay for the products they have purchased, or may pay at a slower rate than we have historically experienced, the risk of which is heightened during periods of economic downturn or uncertainty or, in the case of public sector clients, during periods of budget constraints.

We rely on independent shipping companies for delivery of products and are subject to price increases or service interruptions from these carriers.  We generally ship hardware products to our clients by FedEx, United Parcel Service and other commercial delivery services and invoice clients for delivery charges.  If we are unable to pass on to our clients future increases in the cost of commercial delivery services, our profitability could be adversely impacted.  Additionally, strikes, inclement weather, natural disasters or other service interruptions, including as a result of the COVID-19 pandemic, sustained by such shippers could adversely impact our ability to deliver products on a timely basis.  Such events could have a material adverse effect on our business, financial condition and results of operations.

 

There are risks associated with our international operations that are different than the risks associated with our operations in the United States, and our exposure to the risks of a global market could hinder our ability to maintain and expand international operations.  Outside of the United States, we have operation centers in Australia, Canada, France, Germany, India, the Philippines and the United Kingdom, as well as sales offices throughout EMEA and APAC.  In the regions in which we do not currently have a physical presence, we serve our clients through strategic relationships.  In implementing our international strategy, we may face barriers to entry and competition from local companies and other companies that already have established global

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businesses, as well as the risks generally associated with conducting business internationally.  The success and profitability of international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as:

 

 

political or economic instability;

 

changes in governmental regulation or taxation (foreign and domestic);

 

currency exchange fluctuations;

 

changes in import/export laws, regulations and customs and duties and tariffs (foreign and domestic);

 

trade restrictions (foreign and domestic);

 

difficulties of conducting business, managing operations, and costs of staffing in certain foreign countries;

 

work stoppages or other changes in labor conditions;

 

taxes and other restrictions on repatriating foreign profits back to the United States;

 

extended payment terms;

 

seasonal reductions in business activity in some parts of the world; and

 

natural disasters, terrorism, civil unrest, public health concerns (including health epidemics or outbreaks of communicable diseases such as the COVID-19 pandemic) and other geopolitical uncertainties.

 

In addition, changes in policies and/or laws of the United States or foreign governments, including data privacy restrictions such as the General Data Protection Regulation (“GDPR”) resulting in, among other changes, higher taxation, tariffs or similar protectionist laws, currency conversion limitations, limitations on business operations, or the nationalization of private enterprises could reduce the anticipated benefits of international operations and could have a material adverse effect on our business, financial condition and results of operations.

 

We have currency exposure arising from both sales and purchases denominated in foreign currencies, including intercompany transactions outside the United States, and we currently conduct limited hedging activities.  In addition, some currencies may be subject to limitations on conversion into other currencies, which can limit the ability to otherwise react to rapid foreign currency devaluations.  We cannot predict with precision the effect of future exchange-rate fluctuations, and significant rate fluctuations could have a material adverse effect on our business, financial condition and results of operations.

International operations also expose us to currency fluctuations as we translate the financial statements of our foreign operations to U.S. dollars. 

A natural disaster or other adverse occurrence at one of our primary facilities or client data centers could damage our business.  We have warehouse and distribution facilities in the United States and Canada and in the United Kingdom and Germany.  If the warehouse and distribution equipment at one of our distribution centers were to be seriously damaged, or negatively impacted, by a natural disaster or other adverse occurrence, we could utilize another distribution center or third-party distributors to ship products to our clients.  However, this may not be sufficient to avoid interruptions in our service and may not enable us to meet all of the needs of our clients and would cause us to incur incremental operating costs.  In addition, we operate client data centers and numerous sales offices which may contain both business-critical data and confidential information of our clients.  A natural disaster or other adverse occurrence at any of the client data centers or at any of our major sales offices, including any closures or restrictions on operations as a result of the COVID-19 pandemic, could negatively impact our business, results of operations or cash flows.

 

Risks Related to Our Technology, Data and Intellectual Property

Disruptions in our IT systems and voice and data networks could affect our ability to service our clients and cause us to incur additional expenses.  We believe that our success to date has been, and future results of operations will be, dependent in large part upon our ability to provide prompt and efficient service to our clients.  Our ability to provide that level of service is largely dependent on the ease of use, accuracy, quality and utilization of our IT systems, which impacts our ability to manage our sales, client service, distribution, inventories and accounting systems, and the reliability of our voice and data networks and managed services offerings.  If our current technology is

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determined to have a shorter economic life or the value of our current system is impaired, or necessary improvements to our technology are significantly delayed, we could incur additional expense and/or charges.  The continuing development of our IT systems is crucial for our success.  Accordingly, some of our IT systems are subject to ongoing IT projects designed to streamline or optimize the information systems. In addition, we plan to migrate our EMEA operations to the same IT system used in North America and APAC.  There is no guarantee that we will be successful in these efforts at all times or that there will not be implementation or integration difficulties.  In addition, a substantial interruption in our IT systems or in our voice and data networks, however caused, could occur and could have a material adverse effect on our business, financial condition and results of operations.

Cyberattacks, data incidents and breaches in the security (i) of our information systems and networks, (ii) of the products we sell and services we provide, and (iii) of the electronic and confidential information in our possession could materially adversely impact our financial condition, results of operations, reputation, and relationships with clients, partners, vendors, and teammates.  We are dependent upon automated information technology processes.  Privacy, security, and compliance concerns have continued to increase as technology has evolved to facilitate commerce and as cross-border commerce increases.  As part of our normal business activities, we collect and store or have access to certain proprietary confidential, and personal information, including information about teammates and information about partners, vendors, and clients which may be entitled to protection under a number of regulatory regimes.  In the course of normal and customary business practice, we may share some of this information with vendors and partners who assist us with certain aspects of our business.  Moreover, the success of our operations depends upon the secure transmission of confidential and personal data over public networks, including the use of cashless payments.  The protection and security of our network systems, our clients’ systems, applications, and platforms to which we have access, and our own information, as well as information relating to our clients, partners, vendors, and teammates, is vitally important to us as the compromise, loss, theft, misuse, or unauthorized access to such networks or information could lead to significant reputational or competitive harm, result in litigation involving us or our business partners, expose us to regulatory proceedings, and cause us to incur substantial liability or expenses.  

The frequency, intensity, and sophistication of cyberattacks and data security incidents has significantly increased in recent years and is constant.  As with many other businesses, we are continually subject to cyber-attacks and the risk of data security incidents.  Due to the increased risk of these types of attacks and incidents, we expend significant resources on information technology and data security tools, measures, and processes designed to protect our networks systems, services, and the personal, confidential or proprietary information in our possession, and to ensure an effective response to any cyber-attack or data security incident.  We have privacy and data security policies in place that are designed to detect, prevent, and/or mitigate cyberattacks and data security incidents.  Whether or not these policies, tools, and measures are ultimately successful, the expenditures could have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives.  As newer technologies evolve, and the portfolio of the service providers we share confidential information with grows, we could be exposed to increased risks from cyberattacks, data security events, and data breaches, including those from human error, negligence or mismanagement or from illegal or fraudulent acts.  

Although we take the security of our network systems and information seriously, there can be no assurance that the security measures we employ will effectively prevent unauthorized persons from obtaining unauthorized access to our systems and information due to the evolving nature and intensity of cyberattacks and threats to data security, in light of new and sophisticated tools and methods used by criminals and cyberterrorists to penetrate and compromise systems, including computer viruses, malware, ransomware, phishing, misrepresentation, social engineering and forgery, which make it increasingly challenging to anticipate, harder to detect, and more difficult to adequately mitigate these risks.  Any failure on the part of us or our vendors to maintain the security of our network systems and the proprietary, confidential, and personal data in our possession, including via the penetration of our network security and the misappropriation of proprietary, confidential and personal information, could result in costly investigations and remediation, business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in our teammates’, partners’ and clients’

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confidence in us and other competitive disadvantages, and thus could have a material adverse effect on our business, financial condition and results of operations.  

Cyberthreats are constantly evolving, increasing the difficulty of detecting and successfully defending against them.  Malicious individuals, organizations, and nation-state threat actors may attempt to penetrate or compromise our network systems, the products we sell, or services we provide in order to access, acquire, misappropriate, disclose, alter, or otherwise compromise our teammates’, clients’, and partners’ proprietary, confidential, technical business, and/or personal information in our possession or to which we have access, create system disruptions, cause system or operations shutdowns or perpetrate secondary attacks against our clients, partners, and teammates.  Such individuals or organizations also may develop or deploy viruses, worms, ransomware or otherwise exploit security vulnerabilities of our systems or our product offerings, or attempt to fraudulently induce our employees, clients or others to disclose passwords or other sensitive information or unwittingly provide access to our systems, data, or client environments.  Cyberthreats, cyberattacks, data security incidents, data breaches, malware and similar disruptions from unauthorized access or tampering by malicious actors or inadvertent error could disrupt the security of our systems and business applications, impair our ability to provide services to our clients and protect the privacy of their data, resulting in the unauthorized access to, acquisition, misappropriation, disclosure, alteration, or compromise of confidential, proprietary or technical business information or personal information and thereby could harm our reputation, client relationships, business, and competitive position.  

Like many other businesses, we have been, are, and expect to continue to be, subject to cyberattacks, and data security incidents.  Additionally, some of the hardware and software products we resell could have defects, viruses, vulnerabilities, or otherwise be the subject of cyberattacks, data security events, or data breaches.  We would consider the consequences of such attacks to be the responsibility of the respective manufacturers and publishers of such products, however, if such circumstances were to arise, we may be required to notify clients, regulators and individuals and thereby could be subject to litigation, regulatory inquiry, loss of business, and reputational harm.

We may not be able to protect our intellectual property adequately, and we may be subject to intellectual property infringement claims.  To protect our intellectual property, we rely on copyright, trademark and trade secret laws, unpatented proprietary know-how, and patents, as well as confidentiality, invention assignment, non-solicitation and non-competition agreements.  There can be no assurance that these measures will afford us sufficient protection of our intellectual property, and it is possible that third parties may copy or otherwise obtain and use our proprietary information without authorization or otherwise infringe on our intellectual property rights.  The disclosure of our trade secrets could impair our competitive position and could have a material adverse effect on our business, financial condition and results of operations.  In addition, our registered trademarks and trade names are subject to challenge by third parties.  This may impact our ability to continue using those marks and names.  Likewise, many businesses are actively investing in, developing and seeking protection for intellectual property in the areas of search, indexing, e-commerce and other Web-related technologies, as well as a variety of on-line business models and methods, all of which are in addition to traditional research and development efforts for IT products and application software, and non-practicing entities continue to invest in acquiring patent portfolios for the purpose of turning the portfolios into income-generating assets, whether through licensing campaigns or litigation.  If there is a determination that we have infringed the proprietary rights of others, we could incur substantial monetary liability, be forced to stop selling infringing products or providing infringing services, be required to enter into costly royalty or licensing agreements, if available, or be prevented from using the rights, which could force us to change our business practices or hardware, software or services offerings in the future.  These types of claims and challenges could have a material adverse effect on our business, financial condition and results of operations.

 

Risks Related to Regulatory and Legal Matters

We are exposed to risks from legal proceedings and client audits and failure to comply with the laws and regulations applicable to our operations could adversely impact our business, results of operations or cash flows.  We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, employment, tort and other litigation.  Because of our significant sales to governmental entities, we also are subject to audits by

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federal, state, international, national, provincial and local authorities in the ordinary course of our business.  We also are subject to and currently engage in audits by various vendor partners and large clients, including government agencies, relating to purchases and sales under various contracts.  In addition, we are subject to indemnification claims under various contracts.  Current and future litigation, infringement claims, governmental proceedings and investigations, audits or indemnification claims that we face may result in substantial costs and expenses and significantly divert the attention of our management regardless of the outcome.  Additionally, our operations are subject to numerous U.S. and foreign laws and regulations in a number of areas including areas of labor and employment, advertising, e-commerce, tax, import and export requirements, anti-corruption, data privacy requirements, including data privacy restrictions such as the GDPR or the California Consumer Privacy Act (“CCPA”), data breach notification laws, and certain data security regulations, anti-competition, and environmental, health, and safety. Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business, and the risk of noncompliance. We have implemented policies and procedures designed to help ensure compliance with applicable laws and regulations, but there can be no guarantee against teammates, contractors, or agents violating such laws and regulations or our policies and procedures.

The failure to comply with the terms and conditions of our commercial and public sector contracts could result in, among other things, damages, fines or other liabilities.  Sales to commercial clients are based on stated contractual terms, the terms and conditions on our website or terms contained in purchase orders on a transaction by transaction basis.  Sales to public sector clients are derived from sales to federal, state and local governmental departments and agencies, as well as to educational institutions, through open market sales and various contracts and programs.  Noncompliance with contract terms, or stated terms and conditions on our website, particularly to highly regulated public sector clients, or with government procurement regulations and other requirements could result in fines or penalties against us or termination of contracts, and, in the public sector, could also result in civil, criminal, and administrative liability.  With respect to our public sector clients, the government’s remedies may include suspension or debarment.  In addition, almost all of our contracts have default provisions, and substantially all of our contracts in the public sector are terminable at any time for convenience of the contracting agency.   

 

Changes in, interpretations of, or enforcement trends related to tax rules and regulations may adversely affect our effective income tax rates or operating margins and we may be required to pay additional tax assessments.  We conduct business globally and file tax returns in various U.S. and foreign tax jurisdictions.  Our effective income tax rate could be adversely affected by various factors, many of which are outside of our control, including:

 

 

changes in pre-tax income in various jurisdictions in which we operate that have differing statutory tax rates;

 

increases in corporate tax rates and the availability of deductions or credits in the United States and elsewhere;

 

changes in tax laws, regulations, and/or interpretations of such tax laws in multiple jurisdictions, including but is not limited to U.S. federal and state regulations or interpretations resulting from the Tax Cuts and Jobs Act of 2017;

 

tax effects related to acquisition accounting; and

 

resolutions of issues arising from tax examinations and any related interest or penalties.

The determination of our worldwide provision for income taxes and other tax liabilities requires estimation, judgment and complex calculations in situations where the ultimate tax determination may not be certain.  Our determination of tax liabilities is always subject to review or examination by tax authorities in various jurisdictions.  Any adverse outcome of such review or examination could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Indebtedness

We have a substantial amount of indebtedness, which could have important consequences to our business.  We have a substantial amount of indebtedness.  As of December 31, 2020, we had $438.7 million of total long-term debt outstanding, as defined by U.S. generally accepted accounting principles (“GAAP”), and an additional $356.9 million of obligations outstanding

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under our inventory financing agreements.  We also have the ability to borrow an additional $1.1 billion under our senior secured credit facility.  Our substantial indebtedness could have important consequences, that could have a material adverse effect on our business, financial condition and results of operations, including the following:

 

making it more difficult for us to satisfy our obligations with respect to our indebtedness;

 

requiring us to dedicate a substantial portion of our cash flow from operations to debt service payments on our and our subsidiaries’ debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes;

 

requiring us to comply with restrictive covenants in our senior secured debt facility, which limits the manner in which we conduct our business;

 

limiting our flexibility in planning for, or reacting to, changes in the industry in which we operate;

 

placing us at a competitive disadvantage compared to any of our less-leveraged competitors;

 

increasing our vulnerability to both general and industry-specific adverse economic conditions; and

 

limiting our ability to obtain additional debt or equity financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing.

The accounting method for convertible debt securities that may be settled in cash, such as the notes, could have a material effect on the Company’s reported financial results.  Under Accounting Standards Codification (“ASC”) 470-20, “Debt with Conversion and Other Options,” an entity must separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.  The effect of ASC 470-20 on the accounting for the notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at the issuance date and the value of the equity component is treated as debt discount for purposes of accounting for the debt component of the notes.  As a result, we record a greater amount of non-cash interest expense as a result of the amortization of the discounted carrying value of the notes to their face amount over the term of the notes.  We will report larger net losses (or lower net income) in our financial results because ASC 470-20 requires interest to include both the amortization of the debt discount and the instrument’s non-convertible coupon interest rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the notes.

In addition, under certain circumstances, convertible debt instruments (such as the notes) that may be settled entirely or partly in cash at the election of the issuer and are in the money at the reporting date may be included in the treasury stock method under ASC 260, “Earnings Per Share.”  To the extent that the conversion value of the notes exceeds their principal amount, the shares issuable upon conversion of such notes are included in the calculation of diluted earnings per share thus increasing the number of shares included in this calculation.  We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method.  If we are required to include the notes in the treasury stock method in accounting for the shares issuable upon conversion of the notes, then our diluted earnings per share could be adversely affected.

The conditional conversion feature of the notes, if triggered, may adversely affect the Company’s financial condition and operating results.  In the event the conditional conversion feature of the notes is triggered, holders of notes will be entitled to convert the notes at any time during specified periods at their option.  If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.  In addition, even if holders of notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net current assets.

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INSIGHT ENTERPRISES, INC.

 

The Company is subject to counterparty risk with respect to the convertible note hedge transactions.  The option counterparties are financial institutions or affiliates of financial institutions, and we are subject to the risk that one or more of such option counterparties may default under the convertible note hedge transactions.  Our exposure to the credit risk of the option counterparties will not be secured by any collateral.  If any option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge transaction.  Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in our common stock market price and in the volatility of the market price of our common stock.  In addition, upon a default by the option counterparty, we may suffer adverse tax consequences and dilution with respect to our common stock.

 

The Company may face risk associated with the discontinuation of and transition from London Interbank Offered Rate (LIBOR) as a benchmark interest rate. The Company has outstanding debt with variable interest rates based on LIBOR, and it is anticipated that LIBOR will be discontinued as of the year ending 2021, if no extensions are authorized. The expected discontinuation of LIBOR will require lenders and their borrowers to transition from LIBOR to an alternative benchmark interest rate, which could have an impact on and risk to the Company if not completed in a timely manner. The Company’s current material loan documents include an alternative benchmark interest rate.  At this time, however, it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates in the future. Any new benchmark rate will likely not replicate LIBOR exactly, which could impact our contracts which terminate after 2021. In addition, any changes to benchmark rates in the future may have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows.

 

Our acquisition strategy may increase our outstanding debt and interest expense and decrease the availability under our financing facilities, all of which could have a material adverse effect on our results of operations and financial condition.  To fund our acquisition initiatives, we increase our total borrowings from time to time, such as with the PCM acquisition.  These additional borrowings have the effect of increasing our future interest expenses and require escalating amortization payments.  Additionally, certain of our financing facilities have interest rates that vary based on market conditions and on utilization, which increases our exposure to interest rate fluctuations and may result in greater interest expense than we have forecasted.

Our financing facilities contain covenants that we must comply with in order to avoid an occurrence of an event of default.  The covenants include, among other things, limitations on the payment of dividends and compliance with certain minimum fixed charge ratio and minimum receivables requirements, as well as meeting monthly, quarterly and annual reporting requirements.  Our ability to maintain compliance with our financial covenants and to make scheduled payments on our financing facilities depends on our financial and operating performance.  If we were unable to maintain compliance or to repay the borrowed amounts, the lenders under our financing facilities could declare an event of default and demand payment within a specified period of time.  

General Risk Factors

 

Our future operating results may fluctuate significantly.  Our operating results are highly dependent upon our level of gross profit as a percentage of net sales, which fluctuates due to numerous factors, including changes in prices from partners, changes in the amount and timing of partner funding, volumes of purchases, changes in client mix, management of our cash conversion cycle, the relative mix of products and services sold during the period, general competitive conditions, and strategic product and services pricing and purchasing actions, some of which have been affected by the COVID-19 pandemic.  As a result of significant price competition and our higher concentration of large enterprise clients, our gross margins are low, and we expect them to continue to be low in the future.  Increased competition arising from industry consolidation and low demand for certain IT products and services may hinder our ability to maintain or improve our gross margins.  These low gross margins magnify the impact of variations in revenue and operating costs on our operating results.  In addition, our expense levels are based, in part, on anticipated net sales and the anticipated amount and timing of partner funding, and a portion of our operating expenses are relatively fixed.  Therefore, we may not be able to reduce spending quickly enough to compensate for

24


INSIGHT ENTERPRISES, INC.

 

any unexpected net sales shortfall, and we may not be able to reduce our operating expenses as a percentage of revenue to mitigate any further reductions in gross margins in the future.  If we cannot proportionately decrease our cost structure, our business, financial condition and results of operations could suffer.  In addition, a reduction in the amount of credit granted to us by our partners could increase our need for and cost of working capital and have a material adverse effect on our business, financial condition and results of operations.

We depend on certain key personnel.  We rely on key management teammates to execute our strategy to grow profitable market share.  The loss of one or more of these leaders, or a failure to attract and retain new executives, could have a material adverse effect on our business, financial condition and results of operations.  We also believe that our future success will be largely dependent on our ability to attract and retain highly qualified management, sales, service and technical teammates, and we make significant investments in the training of our leadership team, sales account executives, architects and services engineers.  If we are not able to retain such personnel or to train them quickly enough to meet changing market conditions, we could experience a drop in the overall quality and efficiency of our sales and services teammates, and that could have a material adverse effect on our business, financial condition and results of operations.

The acquisition, integration and operation of acquired businesses may disrupt our business and create additional expenses, and we may not achieve the anticipated benefits of the acquisitions. In connection with our strategic initiatives, we regularly acquire new businesses to expand our technical capabilities, product offerings and client base and to realize cost savings. All acquisitions entail various risks such as difficulties in realizing the benefits of the acquired business, exposure to unexpected liabilities, difficulties in retaining key employees and adverse client reactions.  In addition, integration of an acquired business, such as PCM, involves numerous risks, including assimilation of operations of the acquired business and difficulties in the convergence of IT systems, the diversion of management’s attention from other business concerns, risks of entering markets in which we have had no or only limited direct experience, assumption of unknown or unquantifiable liabilities, the potential loss of key teammates and/or clients, difficulties in completing strategic initiatives already underway in the acquired company, and unfamiliarity with partners of the acquired company, each of which could have a material adverse effect on our business, results of operations and financial condition.  The continued integration activities of the acquired businesses into our business is difficult and time consuming, particularly with the integration of a company the size of PCM, and we may be unable to achieve expected synergies and operating efficiencies over the long term.  We cannot assure that these risks or other unforeseen factors will not offset the intended benefits of the acquisitions, in whole or in part.

Future sales of the Company’s common stock or equity-linked securities in the public market could lower the market price for our common stock.  In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital.  In addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options, restricted stock units, upon conversion of the notes and in connection with the warrants to be issued in connection with the convertible note hedge and warrant transactions.  We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock.  The issuance and sale of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.

Item 1B.  Unresolved Staff Comments

Not applicable.

25


INSIGHT ENTERPRISES, INC.

 

Item 2.  Properties  

Our principal executive offices are located in Tempe, Arizona.  At December 31, 2020, we owned or leased approximately 2.4 million square feet of office and warehouse space, and, while approximately 78% of the square footage is in the United States, we own or lease office and warehouse facilities in Canada and in 10 countries in EMEA and we lease office facilities in 10 countries in APAC.  We believe that our facilities are suitable and adequate for our present purposes, and we anticipate that we will be able to extend our existing leases on terms satisfactory to us or, if necessary, to locate substitute facilities on acceptable terms.  Information about significant sales, distribution, services and administration facilities in use as of December 31, 2020 is summarized in the following table:

 

Operating Segment

Location

Primary Activities

Own or Lease

North America

Tempe, Arizona, USA

Executive Offices, Sales and Administration and Network Operations Center

Own

 

Tempe, Arizona, USA

Client Support Center

Own

 

El Segundo, California, USA

Sales, Services and Administration

Lease

 

Addison, Illinois, USA

Sales and Administration

Lease

 

Eden Prairie, Minnesota, USA

Sales, Services and Administration

Lease

 

Hanover Park, Illinois, USA

Services, Distribution and Administration

Lease

 

Lewis Center, Ohio, USA

Services, Distribution and Administration

Own

 

Worthington, Ohio, USA

Distribution

Lease

 

Plano, Texas, USA

Sales and Administration

Lease

 

Austin, Texas, USA

Sales and Administration

Lease

 

Liberty Lake, Washington, USA

Sales and Administration

Lease

 

Tampa, Florida, USA

Sales and Administration

Lease

 

Conway, Arkansas, USA

Sales and Administration

Lease

 

Winnipeg, Manitoba, Canada

Sales and Administration

Lease

 

Montreal, Quebec, Canada

Sales and Administration

Own

 

Montreal, Quebec, Canada

Distribution

Lease

 

 

 

 

EMEA

Sheffield, United Kingdom

Sales and Administration

Own

 

Sheffield, United Kingdom

Distribution

Lease

 

Uxbridge, United Kingdom

Sales and Administration

Lease

 

Garching, Germany

Sales and Administration

Lease

 

Frankfurt, Germany

Sales and Administration

Lease

 

Frankfurt, Germany

Distribution

Lease

 

Vélizy, France

Sales and Administration

Lease

 

Apeldoorn, Netherlands

Sales and Administration

Lease

 

 

 

 

APAC

Sydney, New South Wales, Australia

Sales and Administration

Lease

 

Perth, Australia

Sales and Administration

Lease

 

Manila, Philippines

Operations Center

Lease

 

In addition to those listed above, we have leased sales offices in various cities across North America, EMEA and APAC and during the fourth quarter of 2019, we completed the purchase of real estate in Chandler, Arizona that we intend to use as our global headquarters.  For additional information on property and equipment and operating leases, see Notes 4 and 9 to the Consolidated Financial Statements in Part II, Item 8 of this report.  For additional information on the subsequent event regarding the sale of our Tempe, Arizona properties see Note 22 to the Consolidated Financial Statements in Part II, Item 8 of this report.

26


INSIGHT ENTERPRISES, INC.

 

For a discussion of legal proceedings, see “Legal Proceedings” in Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this report, which is incorporated by reference herein.   

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock trades under the symbol “NSIT” on The Nasdaq Global Select Market.  As of February 12, 2021, we had 35,103,074 shares of common stock outstanding held by 46 stockholders of record.  This figure does not include an estimate of the number of beneficial holders whose shares are held of record by brokerage firms and clearing agencies.

We have never paid a cash dividend on our common stock, and we currently do not intend to pay any cash dividends in the foreseeable future. Our senior secured revolving credit facility contains restrictions on the payment of cash dividends.  

Issuer Purchases of Equity Securities

We did not repurchase shares of our common stock during the quarter ended December 31, 2020.

See further information on our share repurchase programs in Note 15 to the Consolidated Financial Statements in Part II, Item 8 of this report.  

 

27


INSIGHT ENTERPRISES, INC.

 

 

Stock Price Performance Graph

Set forth below is a graph comparing the percentage change in the cumulative total stockholder return on our common stock with the cumulative total return of the Nasdaq US Benchmark TR Index (Market Index) and the Nasdaq US Benchmark Computer Hardware TR Index (Industry Index).  The graph assumes that $100 was invested on December 31, 2015 in our common stock and in each of the two Nasdaq indices, and that, as to such indices, dividends were reinvested.  We have not, since our inception, paid any cash dividends on our common stock.  Historical stock price performance shown on the graph is not necessarily indicative of future price performance.

 

 

 

 

Dec. 31,

2015

 

 

Dec. 31,

2016

 

 

Dec. 31,

2017

 

 

Dec. 31,

2018

 

 

Dec. 31,

2019

 

 

Dec. 31,

2020

 

Insight Enterprises, Inc. Common

   Stock (NSIT)

 

$

100.00

 

 

$

161.00

 

 

$

152.00

 

 

$

162.00

 

 

$

280.00

 

 

$

303.00

 

Nasdaq US Benchmark TR Index

   (Market Index)

 

 

100.00

 

 

 

113.00

 

 

 

137.00

 

 

 

130.00

 

 

 

170.00

 

 

 

206.00

 

Nasdaq US Benchmark Computer

   Hardware TR Index (Industry Index)

 

 

100.00

 

 

 

115.00

 

 

 

166.00

 

 

 

155.00

 

 

 

285.00

 

 

 

505.00

 

 

28


INSIGHT ENTERPRISES, INC.

 

 

Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements and the Notes thereto in Part II, Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report.  The selected consolidated financial data presented below under the captions “Consolidated Statements of Operations Data” and “Consolidated Balance Sheet Data” as of and for each of the years in the five-year period ended December 31, 2020 is derived from our audited consolidated financial statements.  The consolidated financial statements as of December 31, 2020 and 2019, and for each of the years in the three-year period ended December 31, 2020, which have been audited by KPMG LLP, our independent registered public accounting firm, are included in Part II, Item 8 of this report.

 

 

 

Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

 

(in thousands, except per share data)

 

Consolidated Statements of

   Operations Data (1)(2)(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

8,340,579

 

 

$

7,731,190

 

 

$

7,080,136

 

 

$

6,703,623

 

 

$

5,485,515

 

Costs of goods sold

 

 

7,040,637

 

 

 

6,593,092

 

 

 

6,086,418

 

 

 

5,785,053

 

 

 

4,742,413

 

Gross profit

 

 

1,299,942

 

 

 

1,138,098

 

 

 

993,718

 

 

 

918,570

 

 

 

743,102

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and administrative

   expenses

 

 

1,013,765

 

 

 

880,737

 

 

 

756,529

 

 

 

723,328

 

 

 

585,243

 

Severance and restructuring

   expenses

 

 

12,394

 

 

 

5,425

 

 

 

3,424

 

 

 

9,002

 

 

 

4,580

 

Loss on sale of foreign entity

 

 

 

 

 

 

 

 

 

 

 

3,646

 

 

 

 

Acquisition-related expenses

 

 

2,208

 

 

 

11,342

 

 

 

282

 

 

 

3,329

 

 

 

4,447

 

Earnings from operations

 

 

271,575

 

 

 

240,594

 

 

 

233,483

 

 

 

179,265

 

 

 

148,832

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

41,594

 

 

 

28,478

 

 

 

21,737

 

 

 

17,965

 

 

 

7,562

 

Other expense (income)

 

 

1,529

 

 

 

400

 

 

 

(156

)

 

 

2,202

 

 

 

1,812

 

Earnings before income taxes

 

 

228,452

 

 

 

211,716

 

 

 

211,902

 

 

 

159,098

 

 

 

139,458