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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2002

OR

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

For the transition period from __________ to __________

Commission File Number: 0-25092

INSIGHT ENTERPRISES, INC.

1305 West Auto Drive, Tempe, Arizona 85284
(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       No      

         The number of shares outstanding of the issuer’s common stock as of August 6, 2002 was 46,064,661.

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INSIGHT ENTERPRISES, INC.
FORM 10-Q QUARTERLY REPORT
Three Months Ended June 30, 2002

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PART I – Financial Information
Item 1. Financial Statements

INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

See accompanying notes to condensed consolidated financial statements.

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INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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

1.      Description of Business

         Insight Enterprises, Inc. (the “Company”) is a holding company with the following operating segments: the direct marketing segment (referred to as “Insight”) and the business process outsourcing segment (referred to as “Direct Alliance”).

         Insight is a direct marketer of computers, hardware and software with locations in the United States, Canada and the United Kingdom. Insight sells its products and services via a staff of customer-dedicated account executives utilizing proactive outbound telephone-based sales, a customer-focused “face-to-face” sales force, electronic commerce and marketing, and via the Internet.

         Direct Alliance is a business process outsourcing organization providing marketplace solutions in the areas of direct marketing, direct sales, finance and logistics using proprietary technology, infrastructure and processes.

2.      Basis of Presentation

         The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 2002, the results of operations for the three and six months ended June 30, 2002 and 2001, and the cash flows for the six months ended June 30, 2002 and 2001. The condensed consolidated balance sheet as of December 31, 2001 was derived from the audited consolidated financial statements at such date. Certain amounts in the condensed consolidated financial statements have been reclassified to conform to the current presentation. The results of operations for such interim periods are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements, including the related notes thereto, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

         The condensed consolidated financial statements include the accounts of Insight Enterprises, Inc. and its subsidiaries, which are primarily wholly-owned. Intercompany accounts and transactions have been eliminated in consolidation.

3.      Lines of Credit

         The Company amended its $100,000,000 credit facility with a finance company on April 25, 2002. The amended agreement provides for cash advances outstanding at any one time up to a maximum of $100,000,000 on the line of credit, subject to limitations based upon the Company’s eligible accounts receivable and inventories. Cash advances bear interest at London Interbank Offered Rate for the United States dollar (“US LIBOR”) plus 1.50% (3.34% at June 30, 2002) if the average monthly outstanding balance is less than $35,000,000, US LIBOR plus 2.00% (3.84% at June 30, 2002) if the average monthly outstanding balance is equal to or greater than $35,000,000 but less than $50,000,000 or US LIBOR plus 2.75% (4.59% at June 30, 2002) if the average monthly outstanding balance is equal to or greater than $50,000,000. Interest is payable monthly. The credit facility, up to a maximum outstanding balance of $40,000,000, can be used to facilitate the purchases of inventories from certain suppliers, and that portion is classified on the balance sheet as accounts payable. The credit facility expires February 2003 and is secured by substantially all the assets of the Company, except the assets of Comark. The credit facility contains various covenants including the requirement that the Company maintain a specified amount of tangible net worth as well as restrictions on transferring inventory and accounts receivable to Comark and restrictions on the payment of cash dividends. The Company was in compliance with all such covenants at June 30, 2002. As of June 30, 2002, $33,247,000 was outstanding under the credit facility of which $17,979,000

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

was used to facilitate the purchase of inventories and included in accounts payable. $66,753,000 was available under the credit facility at June 30, 2002.

         Comark, our recently acquired subsidiary, also has a credit facility with a bank. The credit facility provides for cash advances outstanding at any one time up to a maximum of $100,000,000, subject to limitations based upon Comark’s eligible accounts receivable. Cash advances bear interest, at Comark’s option, at the bank’s corporate base rate (3.63% at June 30, 2002), the swing-line rate (2.94% at June 30, 2002) or the bank’s US LIBOR-based rate (3.09% at June 30, 2002), payable quarterly. The credit facility expires April 2003 and is secured by substantially all of the assets of Comark. The credit facility contains various covenants, including the requirement that Comark maintain a specific dollar amount of tangible net worth and certain leverage and interest coverage ratios. Comark was in compliance with all such covenants at June 30, 2002. As part of the credit agreement, $50,000,000 was immediately borrowed against the facility and loaned to the Company as an additional source of funds for the acquisition of Comark. As of June 30, 2002, the outstanding balance was $67,200,000, and $32,800,000 was available under the line of credit.

         Action Limited (“Action”), a subsidiary of the Company in the United Kingdom, has an overdraft facility of $2,287,000 with a bank. The facility expires March 2003 and bears interest at London Interbank Offered Rate for the Great Britain pound plus 1.75% (5.75% at June 30, 2002). As of June 30, 2002, there was an outstanding balance of $1,085,000 and $1,202,000 was available under the overdraft facility. The facility is secured by substantially all of the assets of Action. The prior credit facility in the United Kingdom was terminated in April 2002 in connection with the integration of Action into Insight’s existing United Kingdom operations.

4.      Income Taxes

         Income tax expense as provided for the three and six months ended June 30, 2002 and 2001 is based upon the estimated annual income tax rate of the Company.

5.      Goodwill and Other Intangible Assets

Goodwill

         The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over the respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144.

         The Company’s goodwill balance of $108.7 million as of December 31, 2001 is in the direct marketing segment. Goodwill was tested for impairment as of January 1, 2002 and will be tested for impairment annually in the fourth quarter. As of January 1, 2002, there was no impairment of goodwill. The fair value of the direct marketing segment was estimated using a valuation based on a market approach, which takes into consideration market values of comparable publicly traded companies.

         Application of the provisions of SFAS No. 142 has affected the comparability of current period results of operations with prior periods because the goodwill in the direct marketing segment is no longer being amortized over a twenty-year period. Thus, the following transitional disclosures present net earnings and earnings per share, adjusted as shown below (in thousands, except per share amounts):

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

•     Amortization of goodwill was non-deductible for tax purposes; therefore, the tax component of the adjustment for amortization of goodwill is $0.

The changes in the carrying amount of goodwill for the six months ended June 30, 2002 are as follows (in thousands):

Other Intangible Assets

         Based on preliminary estimates for fair value of intangible assets obtained in connection with the acquisition of Comark, the Comark trade name has been assigned a value of $1,400,000, which represents its gross carrying amount at June 30, 2002. Amortization expense, for the three and six months ended June 30, 2002, and accumulated amortization at June 30, 2002 were $311,000. Given an estimated useful life of 9 months, we expect amortization expense for the years ended December 31, 2002 and 2003 to total $1,244,000 and $156,000, respectively.

6.      Acquisition

         On April 25, 2002, the Company acquired all of the outstanding stock of Comark pursuant to a Stock Purchase Agreement. Under the Agreement, the base purchase price was $150,000,000, subject to adjustments for: 1) an $85,500,000 minimum net book value requirement for Comark as of April 25, 2002; and 2) certain contingent payments pursuant to which the previous owners of Comark could be paid up to an additional $3,600,000 based on the post-closing performance of Comark during the period from April 25, 2002 to December 31, 2003. The purchase price was paid by delivery of $100,000,000 in cash and 2,306,964 shares of the Company’s common stock valued at $50,000,000. The original purchase price of $150,000,000 has subsequently been reduced by $780,388 due to Comark not meeting the minimum net book value requirement of $85,500,000 on the date of acquisition. The reduction in the purchase price will be refunded in cash.

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

         Founded in 1977 and headquartered in Bloomingdale, Illinois, Comark is a reseller of brand name computers, peripherals, networking products, storage products, software and accessories. Comark also provides services such as asset management, configuration and integration, network design and consulting, installations, moves, adds and changes, network monitoring, system integration, enterprise consulting, hardware maintenance and voice/video/data integration. Comark markets to medium-to-large enterprises, educational customers, federal, state and local government agencies, small businesses and certain corporate resellers. Its principal customers are medium-to-large enterprises. As a result of the acquisition, the Company has expanded its customer base in the United States and expects to reduce costs through economies of scale. The Company has recorded total goodwill of $66,287,000 for this acquisition, which is expected to be deductible for tax purposes.

         The following table summarizes the purchase price and the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The Company is in the pro