Insight Enterprises (NSIT) 8-K Completion of Acquisition or Disposition of Assets

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 30, 2006

INSIGHT ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-25092	86-0766246
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

1305 West Auto Drive, Tempe, Arizona	85284
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (480) 902-1001

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

     On June 30, 2006, Insight Enterprises, Inc., (the “Company”) completed the sale of 100% of the outstanding stock of the Company’s wholly owned subsidiary, Direct Alliance Corporation (“Direct Alliance”) to TeleTech Holdings, Inc. (“TeleTech”) for a purchase price of $46.5 million, subject to a working capital adjustment. The purchase price does not include real estate and intercompany receivables, which have an estimated fair value of $49.4 million and were distributed to the Company immediately prior to closing. In addition to payment of the purchase price, TeleTech will be obligated under the agreement to make a one-time bonus payment to the Company if Direct Alliance achieves certain gross profit levels for the year ending December 31, 2006 (“Earn Out”). Additionally, TeleTech will be entitled to a claw back of the purchase price of up to $5.0 million if certain Direct Alliance client contracts are not renewed on terms prescribed in the Agreement.

     Also, the Company paid $2.7 million to the holders of the 1,997,500 exercised Direct Alliance stock options, which may be further adjusted for the above described working capital adjustment, Earn Out and claw back.

     The terms of the transaction are set forth in the Stock Purchase Agreement (the “Agreement”) among the Company, Direct Alliance and Teletech. The Company previously announced the execution of the Agreement on June 14, 2006. The description of the Agreement set forth above is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 15, 2006 and incorporated by reference herein.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(b) Pro Forma Financial Information.

     The following unaudited pro forma consolidated balance sheet as of March 31, 2006, the unaudited pro forma consolidated statement of earnings for the three months ended March 31, 2006, and the unaudited pro forma consolidated statement of earnings for the year ended December 31, 2005 are based on the Company’s historical financial statements after giving effect to the Company’s sale of Direct Alliance.

     The unaudited pro forma consolidated balance sheet as of March 31, 2006 is presented as if the disposition occurred on March 31, 2006. The pro forma consolidated statements of earnings are presented as if the disposition had taken place on January 1, 2005.

     The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results and financial position that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of operating results and financial position that may occur in the future. The unaudited pro forma consolidated financial statements do not reflect the use of the net cash proceeds in the Company’s on-going operations or the effect on the Company’s future financial position. Additionally, the effects of any working capital adjustment, Earn Out or claw back on the cash proceeds, as described in Item 2.01, are not contemplated in the pro forma consolidated financial statements.

     The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements in the Quarterly Report on Form 10-Q for the three months ended March 31, 2006 and in the Annual Report on Form 10-K for the year ended December 31, 2005.

Item 9.01 Financial Statements and Exhibits (continued)

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2006
(in thousands)

			Remove			Pro Forma
	As Reported		Direct Alliance			Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	82,837	$	(139	)	$	43,804	(A)(F)	$	126,780
Accounts receivable, net		419,431		14,951			—			404,480
Inventories		93,836		11			—			93,825
Inventories not available for sale		25,207		—			—			25,207
Deferred income taxes and other current assets		30,495		24,176			21,198	(B)		27,517
Total current assets		651,806		38,999			65,002			677,809
Property and equipment, net		138,427		32,789			—			105,638
Assets held for lease, net		—		—			19,336	(C)		19,336
Goodwill		87,095		—			—			87,095
Other assets		17		—			—			17
	$	877,345	$	71,788		$	84,338		$	889,895
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	171,211	$	5,836		$	—		$	165,375
Accrued expenses and other current liabilities		66,982		1,083			14,050	(D)		79,949
Client payments in advance of shipment		23,741		—			—			23,741
Total current liabilities		261,934		6,919			14,050			269,065
Deferred income taxes and other long-term liabilities		20,571		—			—			20,571
Stockholders’ equity:
Preferred stock		—		—			—			—
Common stock		483		13			13	(E)		483
Additional paid-in capital		311,107		—			(2,696	)(F)		308,411
Retained earnings		266,533		64,856			72,971	(E)(G)		274,648
Accumulated other comprehensive income — foreign currency translation adjustment		16,717		—			—			16,717
Total stockholders’ equity		594,840		64,869			70,288			600,259
	$	877,345	$	71,788		$	84,338		$	889,895

See accompanying notes to unaudited proforma consolidated financial statements.

Item 9.01 Financial Statements and Exhibits (continued)

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31 2005
(in thousands, except per share data)

				Remove			Pro Forma
	As Reported			Direct Alliance			Adjustments			Pro Forma
Net sales	$	3,261,150		$	77,443		$	1,740	(H)	$	3,185,447
Costs of goods sold		2,869,239			60,072			730	(I)		2,809,897
Gross profit		391,911			17,371			1,010			375,550
Operating expenses:
Selling and administrative expenses		289,250			6,313			694	(J)		283,631
Severance and restructuring expenses		12,967			1,005			—			11,962
Reductions in liabilities assumed in a previous acquisition		(664	)		—			—			(664	)
Earnings from operations		90,358			10,053			316			80,621
Non-operating (income) expense:
Interest income		(3,394	)		—			—			(3,394	)
Interest expense		1,914			—			—			1,914
Other expense (income), net		853			(287	)		(13,700	)(K)(L)(M)		(12,560	)
Earnings before income taxes		90,985			10,340			14,016			94,661
Income tax expense		35,641			3,950			5,536	(N)		37,227
Net earnings before cumulative effect of change in accounting principle		55,344			6,390			8,480			57,434
Cumulative effect of change in accounting principle		(649	)		—			—			(649	)
Net earnings	$	54,695		$	6,390		$	8,480		$	56,785
Net earnings per share – Basic:
Net earnings before cumulative effect of change in accounting principle	$	1.14		$	0.13		$	0.17		$	1.18
Cumulative effect of change in accounting principle		(0.01	)		—			—			(0.01	)
Net earnings per share	$	1.13		$	0.13		$	0.17		$	1.17
Net earnings per share – Diluted:
Net earnings before cumulative effect of change in accounting principle	$	1.13		$	0.13		$	0.17		$	1.17
Cumulative effect of change in accounting principle		(0.01	)		—			—			(0.01	)
Net earnings per share	$	1.12		$	0.13		$	0.17		$	1.16
Shares used in per share calculation:
Basic		48,553			48,553			48,553			48,553
Diluted		49,042			49,042			49,042			49,042

See accompanying notes to unaudited pro forma consolidated financial statements.

Item 9.01 Financial Statements and Exhibits (continued)

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2006
(in thousands, except per share data)

				Remove			Pro Forma
	As Reported			Direct Alliance			Adjustments			Pro Forma
Net sales	$	806,038		$	17,135		$	435	(H)	$	789,338
Costs of goods sold		703,745			13,894			184	(I)		690,035
Gross profit		102,293			3,241			251			99,303
Operating expenses:
Selling and administrative expenses		80,045			1,742			185	(J)		78,488
Earnings from operations		22,248			1,499			66			20,815
Non-operating (income) expense:
Interest income		(922	)		—			—			(922	)
Interest expense		797			—			—			797
Other expense (income), net		194			(83	)		(13,496	)(K)(L)(M)		(13,219	)
Earnings before income taxes		22,179			1,582			13,562			34,159
Income tax expense		7,965			604			5,357	(N)		12,718
Net earnings	$	14,214		$	978		$	8,205		$	21,441
Earnings per share:
Basic	$	0.30		$	0.02		$	0.17		$	0.45
Diluted	$	0.29		$	0.02		$	0.17		$	0.44
Shares used in per share calculation:
Basic		48,002			48,002			48,002			48,002
Diluted		48,685			48,685			48,685			48,685

See accompanying notes to unaudited pro forma consolidated financial statements.

Item 9.01 Financial Statements and Exhibits (continued)

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

A.	To reflect cash proceeds of $46.5 million from the sale of Direct Alliance.
B.	To reflect the dividend to the Company of intercompany amounts due to Direct Alliance by the Company.
C.	To reflect the dividend of Direct Alliance’s buildings to the Company.
D.	To reflect the following estimated amounts:

a.	income taxes payable on the sale of Direct Alliance of $6.5 million;
b.	accrued transaction expenses, net of taxes, of $1.9 million;
c.	deferred gain related to clawback of $5.0 million; and
d.	deferred revenue of $0.7 million related to below-market lease of buildings from the Company to Direct Alliance.

E.	To properly reflect Direct Alliance’s equity accounts.
F.	To reflect the $2.7 million cash settlement of exercised options in Direct Alliance.
G.	To reflect the following estimated amounts:

a.	gain on sale, net of tax, of $10.0 million; and
b.	transaction expenses, net of tax, of $1.9 million.

H.	To reflect rental income from the subsequent lease of the buildings from the Company to Direct Alliance.
I.	To reflect depreciation expense on buildings dividend from Direct Alliance to the Company.
J.	To reallocate corporate overhead expenses previously allocated to Direct Alliance.
K.	To record estimated gain on sale of Direct Alliance of $16.5 million.
L.	To reallocate corporate interest income that was previously allocated to Direct Alliance.
M.	To record estimated transaction expenses of $3.1 million.
N.	To reflect the income tax effect of pro forma adjustments using an estimated statutory tax rate of 39.5%.

SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Insight Enterprises, Inc.
Date: July 7, 2006	By:	/s/ Stanley Laybourne
		Stanley Laybourne
		Chief Financial Officer, Treasurer and Secretary