EXHIBIT 99.3
CONF. CALL. #800-755-6769 NAME OF CONFERENCE: INSIGHT ENTERPRISES, INC.
CONFERENCE ID # 4977621
SCRIPT
Q2 2002 PRE EARNINGS ANNOUNCEMENT
CONFERENCE CALL
5PM EASTERN (2PM ARIZONA), THURSDAY 7/18/02
STAN: Welcome everyone and thank you for joining the Insight Enterprises
conference call. Today we will be clarifying further the Company's recent
announcement concerning Anticipated Second Quarter 2002 Results. Today joining
me, Stanley Laybourne, Chief Financial Officer, is Tim Crown, CEO of Insight
Enterprises, Inc.
If you did not receive yesterday's press release, you will find it on our Web
site at insight.com under our investor relations section or you can call for one
at 480/350-1602. As usual, at the conclusion of the scripted portion, we will
answer any questions that our listeners have.
Today's call, including all questions and answers, is again being webcast live
on our website under Company Info/Investor Relations/Conference Calls. An
archived indexed copy of the conference call will be available on the investor
relations section of our website approximately two hours after completion of the
call and will remain until Monday, July 22, 2002. This conference call and the
associated webcast contain time-sensitive information that is accurate only as
of today, July 18, 2002. This call is the property of Insight Enterprises, Inc.
Any redistribution, retransmission or rebroadcast of this call in any form
without the express written consent of Insight Enterprises, Inc. is strictly
prohibited. Finally, let me remind you about forward-looking statements that
might be made on today's call. Our most recent earnings release and 10-K contain
discussions relating to risks and forward-looking information. Any
forward-looking statements that are made in this conference call are subject to
risks and uncertainties that could cause the actual results to differ
materially.
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Now, with all that being said, Tim will begin by discussing the Anticipated
Second Quarter 2002 Results.
OPENING REMARKS
Thank you Stan. Hello everyone and thank you for joining us.
Yesterday we issued a Press Release announcing that we expect our Second Quarter
2002 net sales to be approximately $737 million compared to our previously
stated forecast of $720 million to $760 million and diluted earnings per share
to be between $0.26 and $0.29 compared to our previously stated forecast of
$0.31 to $0.35. Although we will provide more detailed information in our
Earnings Release and Conference Call scheduled for Thursday, July 25, we wanted
to further clarify our Press Release and address several of the questions we
have been receiving since our Release yesterday afternoon.
As stated in yesterday's Press Release, the disappointing Q2 2002 results are
due solely to the operating results of Insight's United Kingdom operations.
Compared to Q1 2002, net sales in the UK declined from $113 million in Q1 to $89
million in Q2 2002. The decline in net sales occurred primarily in the large
enterprise sector. Gross margin percentage also declined in the United Kingdom,
although the gross margin decline was less than 50 basis points. Operating
expenses in the United Kingdom were not appropriately reduced to compensate for
the reduction in net sales and corresponding gross profit dollars resulting in a
net loss in the United Kingdom. It should be noted that if the United Kingdom
contributed comparable net earnings that they contributed in Q1 to this
quarter's consolidated net earnings, we would have achieved consolidated diluted
earnings per share in the original range of $0.31 to $0.35.
The first and most obvious question is "Why did you wait until July 17th to
notify the market that you were going to miss your earlier guidance?" Please be
completely assured that the market was notified as soon as we had completed our
consolidation process and determined the range of the results on a consolidated
basis. Let me take a minute to describe our internal reporting process.
Everyday, we have access to daily, month-to-date and quarter-to-date sales and
gross profit information for each of our operating units. On a weekly basis,
each of our operating units
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provides what we refer to as a "Latest Estimate". This latest estimate provides
a projected income statement for the quarter based on actual information to date
and projected information for the rest of the quarter. Although financial
statements are prepared on a monthly basis company- wide, Latest Estimates
provided during the month are based on actual sales and gross profit to date but
on estimated expenses. Expenses are estimated based on prior month's actual
expense information and the operating unit's knowledge of current changes in the
operating structure. At quarter end, extensive work is completed to further
authenticate the numbers. Information provided by our United Kingdom operations
throughout the quarter consistently showed that, although sales were down,
forecasted net earnings were being met, and it was not until the consolidation
process that it became apparent that actual net earnings results were
substantially lower. This lack of reliable information earlier in the quarter
prevented us not only from communicating the decline in earnings the market
sooner but also precluded us from stepping in operationally to adjust the
operating model in the United Kingdom to the current sales environment.
The next natural question, "What are you doing to improve results in the United
Kingdom?" First of all, as we stated in yesterday's press release, both the
president and chief operating officer of Insight's United Kingdom operations
have resigned, at our request. We have experienced senior management from
Insight's United States operations, including the Senior Vice President that was
in charge of the United Kingdom operations prior to the acquisition of Action
and senior management from the integration team that will operate the business
until the permanent replacements are found. Additionally, our founder, former
CEO and Chairman Eric Crown and I will both be spending a great deal of time in
the United Kingdom after next week's conference call. Tony Smith, President of
Insight Enterprises will continue to focus on the integration of Comark. We will
have more details on our go-forward operational plan and expected results for
the United Kingdom on our conference call next week. We still believe there is
great opportunity in United Kingdom and we need to execute to capitalize on the
opportunity.
Next, I am certain everyone wants to know "How does this effect the Comark
integration? Why
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should we have comfort that the integration will be successful?" First, let's
start with realizing that Comark and Action were two very different companies
when we purchased them. Action had historically lost money and when we bought
them, they were operating at about break even. We knew that integration of
Action had to occur immediately for the acquisition to be accretive. We
eliminated redundant positions immediately and in less than 6 months converted
all of their systems to Insight's operating system. Comark, on the other hand,
is a very well-established company in the United States with a long history of
profitability. We could do nothing with Comark and it would still be an
accretive acquisition. Of course it is our intent to integrate Comark with our
Insight operations so that all of the potential synergies can be realized.
However, the process does not have to be done as quickly as Action and because
Comark is such a well run Company, our intent is to use "best practices" from
both organizations. We are extremely excited to have Comark as part of the
Insight team and their contribution to our consolidated results for May and June
was accretive as expected.
Now that we have explained a little more about the UK operations and why we feel
this should not be a reflection on the Comark operations, I am certain everyone
wants to know how the rest of operations performed. We will be providing
financial information in our earnings release on Thursday, July 25 but I will
give you some top-level color. Direct Alliance's performance was relatively flat
compared to Q1 2002, with net sales of about $24 million. Since we have already
discussed the United Kingdom, that leaves Insight's North American operations
including Comark. Overall sales for North America were approximately $624
million with the acquisition of Comark contributing approximately $235 million.
North America, excluding Comark, generated $389 million compared to $389 million
in Q1 2002 and $496 million in Q1 2001. Remember, Comark's operations are
included in the Company's consolidated operations for only two months of the
quarter.
That concludes my comments. I sincerely hope this call has clarified some of the
questions that were remaining after you read our Press Release yesterday
afternoon. Again, next Thursday, July 25, we have scheduled our Q2 2002 earnings
release and conference call. At that time, you will be provided with more
detailed financial information consistent with our prior quarterly earnings
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releases. Until that time, we will be unable to provide any financial or
statistical information not addressed in yesterday's press release or today's
conference call. With that said, we will now answer any additional questions you
may have.
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