UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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		(I.R.S. Employer Identification Number)
incorporation or organization)

6820 South Harl Avenue, Tempe, Arizona 85283
(Address of principal executive offices) (Zip Code)

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

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 þ     No o

Indicate by a checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted 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 and post such files).

Yes o     No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

Yes o     No þ

The number of shares outstanding of the issuer’s common stock as of July 31, 2009 was 45,864,209.

 

 

INSIGHT ENTERPRISES, INC.
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended June 30, 2009

TABLE OF CONTENTS

		Page
PART I — Financial Information
Item 1 — Financial Statements:
Consolidated Balance Sheets (unaudited) — June 30, 2009 and December 31, 2008			1
Consolidated Statements of Operations (unaudited) — Three and Six Months Ended June 30, 2009 and 2008			2
Consolidated Statements of Cash Flows (unaudited) — Six Months Ended June 30, 2009 and 2008			3
Notes to Consolidated Financial Statements (unaudited)			4
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3 — Quantitative and Qualitative Disclosures About Market Risk			32
Item 4 — Controls and Procedures			32
PART II — Other Information
Item 1 — Legal Proceedings			33
Item 1A — Risk Factors			34
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3 — Defaults Upon Senior Securities			34
Item 4 — Submission of Matters to a Vote of Security Holders			34
Item 5 — Other Information			35
Item 6 — Exhibits			36
Signatures			37
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

INSIGHT ENTERPRISES, INC.

FORWARD-LOOKING INFORMATION

Certain statements in this Quarterly Report on Form 10-Q, including statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 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 matters that affect the amount and timing of net sales, gross profit, operating expenses, earnings from continuing operations, non-operating income and expenses, net earnings or cash flows, the payment of accrued expenses and liabilities (including assumptions about currency fluctuations underlying such statements); effects of acquisitions or dispositions; projections of capital expenditures and uses of our working capital resources; our projections about our outlook for 2009, including projected diluted earnings per share (excluding the impact of certain expenses and charges), fluctuations in our borrowing levels during the remainder of 2009, and the benefits of cost reduction actions we have taken or may take; hiring plans; plans for future operations; the sufficiency of our liquidity and capital resources; the availability of financing and our needs or plans relating thereto; plans relating to our products and services; the effect of new accounting principles or changes in accounting policies; the effect of guaranty and indemnification obligations; projections about the outcome of ongoing tax audits and unrecognized tax benefits for uncertain tax positions; statements related to accounting estimates, including estimated stock option and other equity award forfeitures, and deferred compensation cost amortization periods; the timing of payments relating to previously accrued restructuring charges; projections about the outcome and effect of pending legal proceedings and the sufficiency of our provisions for estimated losses relating thereto; 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 the events discussed in the forward-looking statements will be achieved, and actual results could differ materially from results described by 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:

	•		general economic conditions, including concerns regarding a global recession and credit constraints;
	•		changes in the information technology industry and/or the economic environment;
	•		our reliance on partners for product availability, marketing funds, purchasing incentives and competitive products to sell;
	•		stockholder litigation related to the restatement of our consolidated financial statements;
	•		our ability to collect our accounts receivable;
	•		increased debt and interest expense and lower availability on our financing facilities and changes in the overall capital markets that could increase our borrowing costs or reduce future availability of financing;
	•		disruptions in our information technology systems and voice and data networks, including our system upgrade and the migration of acquired businesses to our information technology systems and voice and data networks;
	•		actions of our competitors, including manufacturers and publishers of products we sell;
	•		the integration and operation of acquired businesses, including our ability to achieve expected benefits of the acquisitions;
	•		seasonal changes in demand for sales of software licenses;
	•		the risks associated with international operations;
	•		exposure to changes in, or interpretations of, tax rules and regulations;
	•		exposure to currency exchange risks and volatility in the U.S. dollar, Canadian dollar, the Euro and the British Pound Sterling exchange rates;
	•		our dependence on key personnel;
	•		failure to comply with the terms and conditions of our public sector contracts;
	•		rapid changes in product standards; and
	•		intellectual property infringement claims and challenges to our registered trademarks and trade names.

Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the Securities and Exchange Commission. Any forward-looking statements in this report should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others. We assume no obligation to update, and 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.

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements.

INSIGHT ENTERPRISES, INC.

		June 30,				December 31,
		2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	119,820			$	49,175
Accounts receivable, net of allowances for doubtful accounts of $15,856 and $20,156, respectively			879,770				990,026
Inventories			83,335				103,130
Inventories not available for sale			24,446				30,507
Deferred income taxes			38,776				40,075
Other current assets			45,427				37,495
Total current assets			1,191,574				1,250,408
Property and equipment, net of accumulated depreciation of $146,072 and $131,633, respectively			155,702				157,334
Goodwill			5,764				—
Intangible assets, net of accumulated amortization of $33,766 and $25,663, respectively			88,152				93,400
Deferred income taxes			86,251				89,757
Other assets			16,552				16,741
		$	1,543,995			$	1,607,640
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	732,710			$	720,833
Accrued expenses and other current liabilities			193,620				175,769
Current portion of long-term debt			—				—
Deferred revenue			34,101				36,339
Total current liabilities			960,431				932,941
Long-term debt			119,500				228,000
Deferred income taxes			1,934				2,291
Other liabilities			20,275				22,440
			1,102,140				1,185,672
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value, 3,000 shares authorized; no shares issued			—				—
Common stock, $0.01 par value, 100,000 shares authorized; 46,864 shares at June 30, 2009 and 45,595 shares at December 31, 2008 issued and outstanding			459				456
Additional paid-in capital			374,013				371,664
Retained earnings			49,187				40,290
Accumulated other comprehensive income — foreign currency translation adjustments			18,196				9,558
Total stockholders’ equity			441,855				421,968
		$	1,543,995			$	1,607,640

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
						As Restated								As Restated
						(1)								(1)
Net sales		$	1,037,162			$	1,396,585			$	1,988,322			$	2,500,083
Costs of goods sold			889,318				1,195,643				1,708,706				2,147,519
Gross profit			147,844				200,942				279,616				352,564
Operating expenses:
Selling and administrative expenses			123,865				152,878				257,208				288,339
Goodwill impairment			—				313,776				—				313,776
Severance and restructuring expenses			2,130				3,508				8,477				5,408
Earnings (loss) from operations			21,849				(269,220	)			13,931				(254,959	)
Non-operating (income) expense:
Interest income			(188	)			(700	)			(288	)			(1,301	)
Interest expense			1,988				3,912				4,088				6,578
Net foreign currency exchange (gain) loss			(162	)			1,055				(213	)			118
Other expense, net			202				171				481				490
Earnings (loss) from continuing operations before income taxes			20,009				(273,658	)			9,863				(260,844	)
Income tax expense (benefit)			7,116				(98,583	)			3,767				(93,942	)
Net earnings (loss) from continuing operations			12,893				(175,075	)			6,096				(166,902	)
Net earnings from a discontinued operation			2,801				—				2,801				—
Net earnings (loss)		$	15,694			$	(175,075	)		$	8,897			$	(166,902	)
Net earnings (loss) per share — Basic:
Net earnings (loss) from continuing operations		$	0.28			$	(3.76	)		$	0.13			$	(3.51	)
Net earnings from a discontinued operation			0.06				—				0.06				—
Net earnings (loss) per share		$	0.34			$	(3.76	)		$	0.19			$	(3.51	)
Net earnings (loss) per share — Diluted:
Net earnings (loss) from continuing operations		$	0.28			$	(3.76	)		$	0.13			$	(3.51	)
Net earnings from a discontinued operation			0.06				—				0.06				—
Net earnings (loss) per share		$	0.34			$	(3.76	)		$	0.19			$	(3.51	)
Shares used in per share calculations:
Basic			45,853				46,594				45,781				47,567
Diluted			46,336				46,594				46,023				47,567

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

		Six Months Ended June 30,
		2009				2008
						As Restated
						(1)
Cash flows from operating activities:
Net earnings (loss)		$	8,897			$	(166,902	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Goodwill impairment			—				313,776
Depreciation and amortization			19,277				19,482
Provision for losses on accounts receivable			1,328				1,529
Write-downs of inventories			3,882				4,275
Non-cash stock-based compensation			7,165				5,889
Non-cash gain from arbitrated claim, net of tax			(2,801	)			—
Excess tax benefit from employee gains on stock-based compensation			—				(110	)
Deferred income taxes			211				(110,476	)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable			145,031				(85,391	)
Decrease (increase) in inventories			23,315				(19,243	)
(Increase) decrease in other current assets			(6,904	)			14,505
(Increase) decrease in other assets			(1,022	)			2,406
(Decrease) increase in accounts payable			(31,662	)			122,878
Increase in deferred revenue			1,068				8,289
Increase (decrease) in accrued expenses and other liabilities			24,840				(8,574	)
Net cash provided by operating activities			192,625				102,333
Cash flows from investing activities:
Acquisition of Calence, net of cash acquired			(12,834	)			(124,671	)
Purchases of property and equipment			(8,345	)			(15,703	)
Other			—				(900	)
Net cash used in investing activities			(21,179	)			(141,274	)
Cash flows from financing activities:
Borrowings on senior revolving credit facility			529,873				372,770
Repayments on senior revolving credit facility			(638,373	)			(176,770	)
Borrowings on accounts receivable securitization financing facility			145,000				181,500
Repayments on accounts receivable securitization financing facility			(145,000	)			(184,500	)
Repayments on term loan			—				(56,250	)
Net borrowings under inventory financing facility			1,210				16,850
Repayments on assumed debt			—				(7,083	)
Payment of deferred financing fees			(531	)			(3,300	)
Proceeds from sales of common stock under employee stock plans			—				3,078
Excess tax benefit from employee gains on stock-based compensation			—				110
Payment of payroll taxes on stock-based compensation through shares withheld			(398	)			(1,983	)
Repurchases of common stock			—				(50,000	)
Increase (decrease) in book overdrafts			6,126				(3,893	)
Net cash (used in) provided by financing activities			(102,093	)			90,529
Foreign currency exchange effect on cash flows			1,292				1,257
Increase in cash and cash equivalents			70,645				52,845
Cash and cash equivalents at beginning of period			49,175				56,718
Cash and cash equivalents at end of period		$	119,820			$	109,563

See accompanying notes to consolidated financial statements.

INSIGHT ENTERPRISES, INC.

1. Basis of Presentation and Recently Issued Accounting Pronouncements

We are a leading provider of information technology (“IT”) hardware, software and services to small, medium and large businesses and public sector institutions in North America, Europe, the Middle East, Africa and Asia-Pacific. The Company is organized in the following three operating segments, which are primarily defined by their related geographies:

Operating Segment		Geography
North America		United States and Canada
EMEA		Europe, Middle East and Africa
APAC		Asia-Pacific

Currently, our offerings in North America and the United Kingdom include IT hardware, software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely software and select software-related services.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly our financial position as of June 30, 2009, our results of operations for the three and six months ended June 30, 2009 and 2008 and our cash flows for the six months ended June 30, 2009 and 2008. The consolidated balance sheet as of December 31, 2008 was derived from the audited consolidated balance sheet at such date. The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with the rules and regulations promulgated by the Securities and Exchange Commission (“SEC”) and consequently do not include all of the disclosures normally required by United States generally accepted accounting principles (“GAAP”).

The results of operations for such interim periods are not necessarily indicative of results for the full year, due in part to the seasonal nature of the business. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the related notes thereto, in our Annual Report on Form 10-K for the year ended December 31, 2008.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Additionally, these estimates and assumptions affect the reported amounts of net sales and expenses during the reported period. Actual results could differ from those estimates. On an ongoing basis, we evaluate our estimates, including those related to sales recognition, anticipated achievement levels under partner funding programs, assumptions related to stock-based compensation valuation, allowances for doubtful accounts, litigation-related obligations, valuation allowances for deferred tax assets and impairment of long-lived assets, including purchased intangibles and goodwill, if indicators of potential impairment exist.

The consolidated financial statements include the accounts of Insight Enterprises, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. References to “the Company,” “we,” “us,” “our” and other similar words refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context suggests otherwise.

Recently Issued Accounting Pronouncements

There have been no material changes or additions to the recently issued accounting pronouncements as previously reported in Note 1 to our Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008 which affect or may affect our financial statements.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Effective January 1, 2009, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations,” FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” and SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement 133.” Other than the additional disclosures required by SFAS No. 161 (see Note 9), the adoption of these pronouncements had no effect on our financial statements.

Effective June 30, 2009, we adopted the provisions of SFAS No. 165 (revised 2007), “Subsequent Events.” Other than the additional disclosures required by SFAS No. 165 (see Note 14), the adoption of this pronouncement had no effect on our financial statements.

2. Restatement of Consolidated Financial Statements

As discussed in our Annual Report in Form 10-K for the year ended December 31, 2008, on February 9, 2009, following an internal review we issued a press release announcing that our management had identified errors in the Company’s accounting for trade credits in prior periods dating back to December 1996. The internal review encompassed aged trade credits, including both aged accounts receivable credits and aged accounts payable credits, arising in the ordinary course of business that were recognized in the Company’s statements of operations prior to the legal discharge of the underlying liabilities under applicable domestic and foreign laws. In a Form 8-K filed on February 10, 2009, we reported that the Company’s financial statements, assessment of the effectiveness of internal control over financial reporting and related audit reports thereon in our Annual Report on Form 10-K for the year ended December 31, 2007, and the interim financial statements in our Quarterly Reports on Form 10-Q for the first three quarters of 2008, and all earnings press releases and similar communications issued by the Company relating to such financial statements, should no longer be relied upon.

We determined that corrections to our consolidated financial statements were required to reverse material prior period reductions of costs of goods sold and the related income tax effects as a result of these incorrect releases of aged trade credits. These trade credits arose from unclaimed credit memos, duplicate payments, payments for returned product or overpayments made to us by our clients, and, to a lesser extent, from goods received by us from suppliers for which we were never invoiced.

In addition to the restatements for aged trade credits, we also corrected previously reported financial statements for other miscellaneous accounting adjustments as a result of a detailed review of our critical accounting policies. These adjustments are detailed in Note 2 “Restatement of Consolidated Financial Statements” in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008.

All prior period financial information contained in this Quarterly Report on Form 10-Q gives effect to the restatement of our consolidated financial statements as described above. Financial information included in reports previously filed or furnished by Insight Enterprises, Inc. for the periods from January 1, 1996 through September 30, 2008 should not be relied upon and are superseded by the information in our Annual Report on Form 10-K for the year ended December 31, 2008, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 and in this Quarterly Report on Form 10-Q.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table presents the effect of the restatement adjustments on the Company’s previously reported statement of operations amounts for the three and six months ended June 30, 2008 (in thousands):

		Three Months Ended June 30, 2008												Six Months Ended June 30, 2008
		As												As
		Reported				Adjustments				As Restated				Reported				Adjustments				As Restated
						(1)				(1)								(1)				(1)
Net sales		$	1,397,722			$	(1,137	)		$	1,396,585			$	2,505,511			$	(5,428	)		$	2,500,083
Costs of goods sold			1,195,980				(337	)			1,195,643				2,150,614				(3,095	)			2,147,519
Gross profit			201,742				(800	)			200,942				354,897				(2,333	)			352,564
Operating expenses:
Selling and administrative expenses			151,909				969				152,878				284,863				3,476				288,339
Goodwill impairment			313,949				(173	)			313,776				313,949				(173	)			313,776
Severance and restructuring expenses			3,508				—				3,508				5,408				—				5,408
Loss from operations			(267,624	)			(1,596	)			(269,220	)			(249,323	)			(5,636	)			(254,959	)
Non-operating (income) expense:
Interest income			(700	)			—				(700	)			(1,301	)			—				(1,301	)
Interest expense			3,948				(36	)			3,912				6,664				(86	)			6,578
Net foreign currency exchange loss			1,055				—				1,055				118				—				118
Other expense, net			171				—				171				490				—				490
Loss from continuing operations before income taxes			(272,098	)			(1,560	)			(273,658	)			(255,294	)			(5,550	)			(260,844	)
Income tax benefit			(97,821	)			(762	)			(98,583	)			(91,537	)			(2,405	)			(93,942	)
Net loss from continuing operations			(174,277	)			(798	)			(175,075	)			(163,757	)			(3,145	)			(166,902	)
Net earnings from a discontinued operation			—				—				—				—				—				—
Net loss		$	(174,277	)		$	(798	)		$	(175,075	)		$	(163,757	)		$	(3,145	)		$	(166,902	)
Net loss per share — Basic:
Net loss from continuing operations		$	(3.74	)		$	(0.02	)		$	(3.76	)		$	(3.44	)		$	(0.07	)		$	(3.51	)
Net earnings from a discontinued operation			—				—				—				—				—				—
Net loss per share		$	(3.74	)		$	(0.02	)		$	(3.76	)		$	(3.44	)		$	(0.07	)		$	(3.51	)
Net loss per share — Diluted:
Net loss from continuing operations		$	(3.74	)		$	(0.02	)		$	(3.76	)		$	(3.44	)		$	(0.07	)		$	(3.51	)
Net earnings from a discontinued operation			—				—				—				—				—				—
Net loss per share		$	(3.74	)		$	(0.02	)		$	(3.76	)		$	(3.44	)		$	(0.07	)		$	(3.51	)

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table presents the effect of the restatement adjustments on the Company’s previously reported cash flow amounts for the six months ended June 30, 2008 (in thousands):

		Six Months Ended June 30, 2008
		As Reported				Adjustments				As Restated
						(1)				(1)
Cash flows from operating activities:
Net loss		$	(163,757	)		$	(3,145	)		$	(166,902	)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Goodwill impairment			313,949				(173	)			313,776
Depreciation and amortization			19,408				74				19,482
Provision for losses on accounts receivable			1,529				—				1,529
Write-downs of inventories			4,275				—				4,275
Non-cash stock-based compensation			5,638				251				5,889
Excess tax benefit from employee gains on stock-based compensation			(108	)			(2	)			(110	)
Deferred income taxes			(110,270	)			(206	)			(110,476	)
Changes in assets and liabilities:
Increase in accounts receivable			(90,819	)			5,428				(85,391	)
Increase in inventories			(14,217	)			(5,026	)			(19,243	)
Decrease in other current assets			14,505				—				14,505
Decrease in other assets			2,406				—				2,406
Increase in accounts payable			141,297				(18,419	) (2)			122,878
Increase in deferred revenue			8,289				—				8,289
Decrease in accrued expenses and other liabilities			(13,084	)			4,510				(8,574	)
Net cash provided by operating activities			119,041				(16,708	)			102,333
Cash flows from investing activities:
Acquisition of Calence, net of cash acquired			(124,671	)			—				(124,671	)
Purchases of property and equipment			(15,617	)			(86	)			(15,703	)
Other			(900	)			—				(900	)
Net cash used in investing activities			(141,188	)			(86	)			(141,274	)
Cash flows from financing activities:
Borrowings on senior revolving credit facility			372,770				—				372,770
Repayments on senior revolving credit facility			(176,770	)			—				(176,770	)
Borrowings on long-term financing facility			181,500				—				181,500
Repayments on long-term financing facility			(184,500	)			—				(184,500	)
Repayments on term loan			(56,250	)			—				(56,250	)
Net borrowings under inventory financing facility			—				16,850	(2)			16,850
Repayments on assumed debt			(7,083	)			—				(7,083	)
Deferred financing fees			(3,300	)			—				(3,300	)
Proceeds from sales of common stock under employee stock plans			3,078				—				3,078
Excess tax benefit from employee gains on stock-based compensation			108				2				110
Payment of payroll taxes on stock-based compensation through shares withheld			(1,983	)			—				(1,983	)
Repurchases of common stock			(50,000	)			—				(50,000	)
Increase in book overdrafts			(3,893	)			—				(3,893	)
Net cash used in financing activities			73,677				16,852				90,529
Foreign currency exchange effect on cash flows			1,315				(58	)			1,257
Increase in cash and cash equivalents			52,845				—				52,845
Cash and cash equivalents at beginning of period			56,718				—				56,718
Cash and cash equivalents at end of period		$	109,563			$	—			$	109,563

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

3. Net Earnings (Loss) from Continuing Operations Per Share (“EPS”)

Basic EPS is computed by dividing net earnings (loss) from continuing operations available to common stockholders by the weighted average number of common shares outstanding during each quarter. Diluted EPS is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and restricted stock units. A reconciliation of the denominators of the basic and diluted EPS calculations follows (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
						As Restated								As Restated
						(1)								(1)
Numerator:
Net earnings (loss) from continuing operations		$	12,893			$	(175,075	)		$	6,096			$	(166,902	)
Denominator:
Weighted average shares used to compute basic EPS			45,853				46,594				45,781				47,567
Dilutive potential common shares due to dilutive options and restricted stock units, net of tax effect			483				—				242				—
Weighted average shares used to compute diluted EPS			46,336				46,594				46,023				47,567
Net earnings (loss) from continuing operations:
Basic		$	0.28			$	(3.76	)		$	0.13			$	(3.51	)
Diluted		$	0.28			$	(3.76	)		$	0.13			$	(3.51	)

During the three and six months ended June 30, 2009, 1,759,000 and 2,028,000 weighted average outstanding stock options, respectively, were not included in the diluted EPS calculation because the exercise prices of these options were greater than the average market price of our common stock during the period. No potential common shares were included in the diluted EPS computation for the three and six months ended June 30, 2008 because of the net loss in those periods, which would result in an antidilutive per share amount.

4. Goodwill

During the six months ended June 30, 2009, we accrued $5,764,000 of additional purchase price consideration and the related accrued interest thereon as a result of Calence, LLC (“Calence”), acquired April 1, 2008, achieving certain performance targets during the respective periods. In April 2009, a cash payment of $12,834,000 was made to the former owners of Calence related to this additional purchase price consideration and the related interest thereon accrued through March 31, 2009. Such amount is reflected as an investing activity within the Consolidated Statement of Cash Flows. Additional purchase price consideration and the related accrued interest thereon of $3,292,000 that was accrued during the three months ended June 30, 2009 is included in accrued expenses and other current liabilities within the Consolidated Balance Sheet.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

5. Debt and Inventory Financing Facility

Debt

Our long-term debt consists of the following (in thousands):

		June 30,				December 31,
		2009				2008
Senior revolving credit facility		$	119,500			$	228,000
Accounts receivable securitization financing facility (the “ABS facility”)			—				—
Total			119,500				228,000
Less: current portion of term loan			—				—
Long-term debt		$	119,500			$	228,000

Our senior revolving credit facility matures April 1, 2013. Our financing facilities contain various covenants. If we fail to comply with these covenants, the lenders would be able to demand payment within a specified period of time. At June 30, 2009, we were in compliance with all such covenants.

Inventory Financing Facility

As of June 30, 2009 and December 31, 2008, $82,114,000 and $80,904,000, respectively, was included in accounts payable within the Consolidated Balance Sheet related to our inventory financing facility.

6. Income Taxes

Our effective tax rate from continuing operations for the three and six months ended June 30, 2009 was 35.6% and 38.2%, respectively. For the three and six months ended June 30, 2009, our effective tax rate was higher than the United States federal statutory rate of 35.0% due primarily to state income taxes, net of federal tax, partially offset by lower taxes on income earned in foreign jurisdictions.

Our effective tax rate for the three months ended June 30, 2008 was 36.0% on a $273,658,000 loss from continuing operations. Our effective tax rate for the six months ended June 30, 2008 was also 36.0% on a $260,844,000 loss from continuing operations. The effective tax rate for both periods differed from the United States federal statutory rate of 35.0% due primarily to state income taxes, net of federal tax, and lower taxes on income earned in foreign jurisdictions, offset by the non-deductible portion of the goodwill impairment charge.

Several of our subsidiaries are currently under audit for the 2002 through 2006 tax years. It is reasonably possible that the examination phase of these audits may conclude in the next 12 months and that the related unrecognized tax benefits for uncertain tax positions may change, potentially having a material effect on our effective tax rate. However, based on the status of the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible outcomes cannot be made at this time.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

7. Severance, Restructuring and Acquisition Integration Activities

Severance Costs Expensed in 2009

During the three months ended June 30, 2009, EMEA and APAC recorded severance expense totaling $1,900,000 and $230,000, respectively, and during the six months ended June 30, 2009, North America, EMEA and APAC recorded severance expense totaling $5,859,000, $2,317,000 and $301,000, respectively, related to on-going restructuring efforts to reduce operating expenses related to support functions. The following table details the changes in these liabilities during the six months ended June 30, 2009 (in thousands):

		North America				EMEA				APAC				Consolidated
Severance costs		$	5,859			$	2,317			$	301			$	8,477
Foreign currency translation adjustments			—				100				(2	)			98
Cash payments			(5,188	)			(394	)			(81	)			(5,663	)
Balance at June 30, 2009		$	671			$	2,023			$	218			$	2,912

All remaining outstanding obligations are expected to be paid during the year ending December 31, 2009 and are therefore included in accrued expenses and other current liabilities.

Severance Costs Expensed in 2008

During the year ended December 31, 2008, North America, EMEA and APAC recorded severance expense related to on-going restructuring efforts to reduce operating expenses related to support functions. The following table details the changes in these liabilities during the six months ended June 30, 2009 (in thousands):

		North America				EMEA				APAC				Consolidated
Balance at December 31, 2008		$	775			$	1,939			$	—			$	2,714
Foreign currency translation adjustments			—				4				—				4
Cash payments			(557	)			(1,759	)			—				(2,316	)
Balance at June 30, 2009		$	218			$	184			$	—			$	402

All remaining outstanding obligations are expected to be paid during the year ending December 31, 2009 and are therefore included in accrued expenses and other current liabilities.

Acquisition-Related Costs Capitalized in 2006 as a Cost of Acquisition of Software Spectrum

In 2006, we recorded $9,738,000 of employee termination benefits and $1,676,000 of facility based costs in connection with the integration of Software Spectrum. These costs were recognized as a liability assumed in the purchase business combination and included in the allocation of the cost to acquire Software Spectrum.

The employee termination benefits relate to severance payments for Software Spectrum teammates in North America and EMEA who have been or will be terminated in connection with integration plans. The facilities based costs relate to future lease payments or lease termination costs associated with vacating certain Software Spectrum facilities in EMEA.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table details the changes in these liabilities during the six months ended June 30, 2009 (in thousands):

		North America				EMEA				Consolidated
Balance at December 31, 2008		$	341			$	2,806			$	3,147
Foreign currency translation adjustments			—				105				105
Adjustments			—				(818	)			(818	)
Cash payments			—				(305	)			(305	)
Balance at June 30, 2009		$	341			$	1,788			$	2,129

In the accompanying consolidated balance sheet at June 30, 2009, $1,920,000 is expected to be paid in 2009 and is therefore included in accrued expenses and other current liabilities, and $209,000 is expected to be paid after 2009 and is therefore included in other liabilities (long-term). An adjustment of $818,000 was recorded as a reduction of selling and administrative expenses recorded during the three and six months ended June 30, 2009 and the related severance accrual in EMEA due to a change in estimate of the costs of the integration plan.

Restructuring Costs Expensed in 2005

During the year ended December 31, 2005, Insight UK moved into a new facility and recorded facilities-based restructuring costs of $7,458,000.

The following table details the changes in this liability during the six months ended June 30, 2009 (in thousands):

		EMEA
Balance at December 31, 2008		$	1,050
Foreign currency translation adjustments			147
Cash payments			(205	)
Balance at June 30, 2009		$	992

In the accompanying consolidated balance sheet at June 30, 2009, the remaining accrual of $992,000 is expected to be paid in 2009, as the leases expire in December 2009, and is therefore included in accrued expenses and other current liabilities.

8. Stock-Based Compensation

We recorded the following pre-tax amounts for stock-based compensation, by operating segment, in our consolidated financial statements (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
						As Restated								As Restated
						(1)								(1)
North America		$	865			$	1,892			$	5,125			$	4,059
EMEA			179				728				1,932				1,676
APAC			30				74				108				154
Total		$	1,074			$	2,694			$	7,165			$	5,889

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Stock Options

For the three months ended June 30, 2009, we recorded stock-based compensation expense related to stock options, net of an estimate of forfeitures, of $70,000 and for the three months ended June 30, 2008 we recorded a benefit of $253,000 in continuing operations related to the reversal of previously recognized expense as the result of actual forfeited awards being in excess of estimated forfeitures. For the six months ended June 30, 2009 and 2008, we recorded stock-based compensation expense related to stock options, net of an estimate of forfeitures, of $135,000 and $293,000, respectively. As of June 30, 2009, total compensation cost not yet recognized related to nonvested stock options is $540,000, which is expected to be recognized over the next .86 years on a weighted-average basis.

The following table summarizes our stock option activity during the six months ended June 30, 2009:

														Weighted
										Aggregate				Average
						Weighted				Intrinsic Value				Remaining
		Number				Average				(in-the-money				Contractual
		Outstanding				Exercise Price				options)				Life (in years)
Outstanding at January 1, 2009			2,536,673			$	19.47
Granted			—				—
Exercised			—				—			$	—
Forfeited or expired			(946,408	)			19.81
Outstanding at June 30, 2009			1,590,265				19.27			$	—				0.94
Exercisable at June 30, 2009			1,456,932				19.40			$	—				0.71
Vested and expected to vest			1,574,492				19.28			$	—				0.92

There is no aggregate intrinsic value reflected in the preceding table because our closing stock price of $9.66 as of June 30, 2009 was less than the exercise price of all outstanding options.

The following table summarizes the status of outstanding stock options as of June 30, 2009:

		Options Outstanding												Options Exercisable
										Weighted								Weighted
						Weighted Average				Average								Average
Range of		Number of				Remaining				Exercise				Number of				Exercise
Exercise		Options				Contractual				Price Per				Options				Price Per
Prices		Outstanding				Life (in years)				Share				Exercisable				Share
$13.94 – 17.77			339,106				2.26			$	16.96				205,773			$	16.43
17.79 – 18.65			369,601				0.79				18.54				369,601				18.54
18.67 – 19.79			59,124				0.89				19.25				59,124				19.25
19.90 – 19.90			500,000				0.38				19.90				500,000				19.90
20.00 – 41.00			322,434				0.60				21.55				322,434				21.55
			1,590,265				0.94				19.27				1,456,932				19.40

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Restricted Stock

For the three months ended June 30, 2009 and 2008, we recorded stock-based compensation expense, net of estimated forfeitures, related to restricted stock shares and RSUs of $1,004,000 and $2,947,000, respectively. For the six months ended June 30, 2009 and 2008, we recorded stock-based compensation expense, net of estimated forfeitures, related to RSUs of $7,030,000 and $5,596,000, respectively. The expense for the six months ended June 30, 2009 includes a non-cash charge of $5,478,000 that was recognized as a result of the cancellation of certain long-term incentive awards discussed below. As of June 30, 2009, total compensation cost not yet recognized related to nonvested RSUs is $7,112,000, which is expected to be recognized over the next 1.09 years on a weighted-average basis. The following table summarizes our RSU activity during the six months ended June 30, 2009:

						Weighted Average
						Grant Date Fair
		Number				Value				Fair Value
Nonvested at January 1, 2009			1,520,156			$	13.71
Granted			1,154,373				3.11
Vested, including shares withheld to cover taxes			(369,285	)			19.41			$	1,454,133	(a)
Forfeited			(917,340	)			9.37
Nonvested at June 30, 2009			1,387,904				6.24			$	13,407,153	(b)
Expected to vest			1,152,383							$	11,132,020	(b)

During the six months ended June 30, 2009, the RSUs that vested for teammates in the United States were net-share settled such that we withheld shares with value equivalent to the teammates’ minimum statutory United States tax obligation for the applicable income and other employment taxes and remitted the cash to the appropriate taxing authorities. The total shares withheld during the six months ended June 30, 2009 of 100,803 were based on the value of the RSUs on their vesting date as determined by our closing stock price on such date. For the six months ended June 30, 2009, total payments for the employees’ tax obligations to the taxing authorities were $398,000 and are reflected as a financing activity within the Consolidated Statements of Cash Flows. These net-share settlements had the economic effect of repurchases of common stock as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent a repurchase of shares or an expense to us.

On January 23, 2008, the Compensation Committee of our Board of Directors approved a special long-term incentive award for the Chief Executive Officer, the President of our North America/APAC operating segments and the President of our EMEA operating segment. The approved grant level targets were as follows:

•

Richard A. Fennessy, President and Chief Executive Officer — 300,000 RSUs;

•

Mark T. McGrath, President, North America/APAC — 150,000 RSUs; and

•

Stuart A. Fenton, President, EMEA — 100,000 RSUs.

The plan provided for the award of RSUs that were to be issued based upon achievement of specific stock price hurdles within specific timeframes over a three-year period from 2009-2011. If all or some hurdles were not achieved, 33% of the remaining award (i.e., any shares not issued for achievement of the specific stock price hurdles in the specific timeframes) would have been made on February 15, 2013, assuming continued employment. However, due to the economic climate and the decrease in Insight’s stock price, on February 19, 2009, Messrs. Fennessy, Fenton and McGrath agreed to forfeit the awards, resulting in the termination of the awards. Accordingly, no shares were, or will be, issued under these awards. A non-cash charge of $5,478,000 was recognized as a result of the cancellation of these awards. Such amount is included in selling and administrative expenses in the Consolidated Statement of Operations for the six months ended June 30, 2009.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

9. Derivative Financial Instruments

We use derivatives to partially offset our exposure to fluctuations in certain foreign currencies. We do not enter into derivatives for speculative or trading purposes. Derivatives are recorded at fair value on the balance sheet and gains or losses resulting from changes in fair value of the derivative are recorded currently in income. The Company does not designate its hedges for special hedge accounting.

Non-Designated Hedges

We use foreign exchange forward contracts to hedge certain non-functional currency assets and liabilities from changes in exchange rate movements. Our non-functional currency assets and liabilities are primarily related to foreign currency denominated payables, receivables, and cash balances. The foreign currency forward contracts, carried at fair value, typically have a maturity of one month or less. We currently enter into approximately four foreign exchange forward contracts per month with an average notional value of $7,400,000 and an average maturity of approximately one week.

The counterparties associated with our foreign exchange forward contracts are large credit worthy commercial banks. The derivatives transacted with these institutions are short in duration and therefore we do not consider counterparty concentration and non-performance to be material risks.

The following table summarizes our derivative financial instruments as of June 30, 2009 (in thousands):

		Asset Derivatives						Liability Derivatives
		Balance Sheet Location		Fair Value				Balance Sheet Location		Fair Value
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts		Other current assets		$	4			Accrued expenses and other current liabilities		$	(1	)
Total derivatives not designated as hedging instruments				$	4					$	(1	)

The following table summarizes the effect of our derivative financial instruments on our results of operations during the three and six months ended June 30, 2009 (in thousands):

				Amount of Loss Recognized in
				Earnings on Derivative
				Three Months				Six Months
Derivatives Not Designated as Hedging		Location of Loss Recognized in		Ended				Ended
Instruments		Earnings on Derivative		June 30, 2009				June 30, 2009
Foreign exchange contracts		Net foreign currency exchange loss		$	682			$	1,817
Total				$	682			$	1,817

10. Fair Value Measurements

The following table summarizes the valuation of our financial instruments by the following three categories as of June 30, 2009 (in thousands):

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

						Quoted				Significant
						Market Prices				Other				Significant
		Value as of				in Active				Observable				Unobservable
		June 30,				Markets				Inputs				Inputs				Balance Sheet
		2009				(Level 1)				(Level 2)				(Level 3)				Classification
Assets:
Foreign Exchange Derivatives		$	4			$	—			$	4			$	—			Other current assets
Total Assets at Fair Value		$	4			$	—			$	4			$	—
Liabilities:
Foreign Exchange Derivatives		$	1			$	—			$	1			$	—			Accrued expenses and other current liabilities
Total Liabilities at Fair Value		$	1			$	—			$	1			$	—

We have elected to use the income approach to value the foreign exchange derivatives, using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present value amount assuming that participants are motivated, but not compelled, to transact. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR rates, foreign exchange rates, and foreign exchange forward points). Mid-market pricing is used as a practical expedient for fair value measurements. The fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness when in an asset position and the Company’s creditworthiness when in a liability position has also been factored into the fair value measurement of the derivative instruments and did not have a material impact on the fair value of these derivative instruments. Both the counterparty and the Company are expected to continue to perform under the contractual terms of the instruments.

As of June 30, 2009, we have no nonfinancial assets or liabilities that are measured on a recurring basis and our other financial assets or liabilities generally consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities. The estimated fair values of our cash equivalents is determined based on quoted prices in active markets for identical assets. The fair value of the other financial assets and liabilities is based on the value that would be received or paid in an orderly transaction between market participants and approximates the carrying value due to their nature and short duration.

11. Comprehensive Income (Loss)

Comprehensive income (loss) for the three and six months ended June 30, 2009 and 2008 includes the following component (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
						As Restated								As Restated
						(1)								(1)
Net earnings (loss)		$	15,694			$	(175,075	)		$	8,897			$	(166,902	)
Other comprehensive income, net of tax:
Foreign currency translation adjustments			14,172				1,500				8,638				7,852
Total comprehensive income (loss)		$	29,866			$	(173,575	)		$	17,535			$	(159,050	)

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

12. Commitments and Contingencies

Contractual

In the ordinary course of business, we issue performance bonds to secure our performance under certain contracts or state tax requirements. As of June 30, 2009 and December 31, 2008, we had approximately $28,972,000 and $24,623,000, respectively, of performance bonds outstanding. These bonds are issued on our behalf by a surety company on an unsecured basis; however, if the surety company is ever required to pay out under the bonds, we have contractually agreed to reimburse them.

Employment Contracts

We have employment contracts with certain officers and management teammates under which severance payments would become payable and accelerated vesting of stock-based compensation would occur in the event of specified terminations without cause or terminations under certain circumstances after a change in control. If such persons were terminated without cause or under certain circumstances after a change of control, and the severance payments under the current employment agreements were to become payable, the severance payments would generally range from twelve to twenty-four months of the teammate’s salary.

Guaranties

In the ordinary course of business, we may guarantee the indebtedness or performance obligations of our subsidiaries to vendors and clients. We have not recorded specific liabilities for these guaranties in the consolidated financial statements because, to the extent applicable, we have recorded the underlying liabilities associated with the guaranties. In the event we are required to perform under the related contracts, we believe the cost of such performance would not have a material adverse effect on our consolidated financial position or results of operations. Our financing agreements generally limit the amount of guarantees that may be outstanding at a point in time related to client or vendor contracts where such guarantees are considered indebtedness, as defined in the financing agreements.

Indemnifications

From time to time, in the ordinary course of business, we enter into contractual arrangements under which we agree to indemnify either our clients or third-party service providers from certain losses incurred relating to services performed on our behalf or for losses arising from defined events, which may include litigation or claims relating to past performance. These arrangements include, but are not limited to, the indemnification of our landlords for certain claims arising from our use of leased facilities and the indemnification of the lenders that provide our credit facilities for certain claims arising from their extension of credit to us. Such indemnification obligations may not be subject to maximum loss clauses.

In connection with our sale of Direct Alliance in June 2006, the sale agreement contains certain indemnification provisions pursuant to which we are required to indemnify the buyer for a limited period of time for liabilities, losses or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale.

Management believes that payments, if any, related to these indemnifications are not probable at June 30, 2009 and, if incurred, would not be material. Accordingly, we have not accrued any liabilities related to such indemnifications in our consolidated financial statements

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Contingencies Related to Third-Party Review

From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, client and vendor audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in the consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.

Legal Proceedings

We are party to various legal proceedings arising in the ordinary course of business, including preference payment claims asserted in client bankruptcy proceedings, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations.

We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and are adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular claim. Although litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that the results of our operations or cash flows could be materially and adversely affected in any particular period by the resolution of a legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.

Beginning in March 2009, three purported class action lawsuits were filed in the U.S. District Court for the District of Arizona against us and certain of our current and former directors and officers on behalf of purchasers of our securities during the period April 22, 2004 to February 6, 2009. The plaintiffs in two of these lawsuits voluntarily dismissed their complaints in May and June 2009. The remaining complaint, which seeks unspecified damages, asserts claims under the federal securities laws relating to our February 9, 2009 announcement that we expected to restate our financial statements for the year ended December 31, 2007 and for the first three quarters of 2008 and that the restatement would include a material reduction of retained earnings. The complaint also alleges that we issued false and misleading financial statements and issued misleading public statements about our results of operations. The court appointed a lead plaintiff and lead counsel on June 24, 2009. None of the defendants have responded to the complaint at this time. In June 2009, we were notified that three shareholder derivative lawsuits had been filed, two in the Superior Court in Maricopa County, Arizona (the “State derivative actions”) and one in the U.S. District Court for the District of Arizona (the “Federal derivative action”), by persons identifying themselves as Insight shareholders and purporting to act on behalf of Insight, naming Insight as a nominal defendant and current and former officers and directors as defendants. The three complaints, like the purported class action complaint, arise out of our February 9, 2009 announcement. The State derivative actions allege breaches of fiduciary duties of loyalty and good faith, breach of fiduciary duties for insider selling and misappropriation of information, and unjust enrichment, and the Federal derivative action alleges breach of fiduciary duty, gross mismanagement and waste of corporate assets. The amount of damages sought by the plaintiffs is not specified in the complaints. On July 31, 2009, we received, from the plaintiff in the Federal derivative action, a demand to inspect books and records pursuant to Section 220 of the Delaware General Corporation Law, and we are evaluating this demand. Neither the Company nor the individual defendants have answered or moved to dismiss any of the derivative complaints at this time.

INSIGHT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

On March 19, 2009, we received a letter of informal inquiry from the SEC requesting certain documents and information relating to the Company’s historical accounting treatment of aged trade credits. On August 3, 2009, the staff of the SEC notified the Company that its investigation into the Company’s historical accounting treatment of aged trade credits has been completed and that the staff does not intend to recommend any enforcement action by the SEC against the Company.

Management does not believe that the ultimate outcome of these legal proceedings will have a material effect on our results of operations.

13. Segment Information

We operate in three reportable geographic operating segments: North America; EMEA; and APAC. Currently, our offerings in North America and the United Kingdom include IT hardware, software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely software and select software-related services.

All intercompany transactions are eliminated upon consolidation, and there are no differences between the accounting policies used to measure profit and loss for our segments and on a consolidated basis. Net sales are defined as net sales to external clients. None of our clients exceeded ten percent of consolidated net sales for the three and six months ended June 30, 2009.

A portion of our operating segments’ selling and administrative expenses arise from shared services and infrastructure that we have historically provided to them in order to realize economies of scale and to use resources efficiently. These expenses, collectively identified as corporate charges, include senior management expenses, internal audit, legal, tax, insurance services, treasury and other corporate infrastructure expenses. Charges are allocated to our operating segments, and the allocations have been determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the operating segments.

The tables below present information about our reportable operating segments as of and for the three months ended June 30, 2009 and 2008 (in thousands):

		Three Months Ended June 30, 2009
		North America				EMEA				APAC				Consolidated
Net sales		$	713,531			$	281,241			$	42,390			$	1,037,162
Costs of goods sold			613,783				239,468				36,067				889,318
Gross profit			99,748				41,773				6,323				147,844
Operating expenses:
Selling and administrative expenses			85,980				33,814				4,071				123,865
Severance and restructuring expenses			—				1,900				230				2,130
Earnings from operations		$	13,768			$	6,059			$	2,022				21,849
Non-operating expense, net															1,840
Earnings from continuing operations before income taxes															20,009
Income tax expense															7,116
Net earnings from continuing operations															12,893
Net earnings from a discontinued operation															2,801
Net earnings														$	15,694
Total assets at period end		$	1,324,915			$	444,439			$	55,496			$	1,543,995	*