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

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))

 

 

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.

						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.

						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.

						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.

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.