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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended: March 31, 2003

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 [X]           No [   ]

Indicate by check mark whether registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act).

Yes [X]          No [   ]

The number of shares outstanding of the issuer’s common stock as of May 1, 2003 was 46,136,840.

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INSIGHT ENTERPRISES, INC.
FORM 10-Q QUARTERLY REPORT
Three Months Ended March 31, 2003

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INSIGHT ENTERPRISES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS

     Certain statements in this Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part 1 Item 2, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, among other things, projections of matters that affect sales, gross profit, operating expenses, earnings from operations or net earnings; projections of capital expenditures; projections for growth; hiring plans; plans for future operations, including the execution of acquisition integration plans; financing needs or plans; plans relating to our products and services; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements 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 information. 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:

	•		risks associated with our integration and operation of past and future acquired businesses;
	•		reduced demand for products and services in our industry;
	•		current unfavorable economic conditions (including uncertainty created by international situations);
	•		actions of competitors;
	•		changes in supplier reimbursement and buying programs;
	•		our ability to manage growth successfully;
	•		changing methods of distribution;
	•		risks associated with international operations;
	•		reliance on suppliers;
	•		reliance on information and telephone systems;
	•		reliance on our outsourcing clients;
	•		rapid changes in product standards;
	•		dependence on key personnel;
	•		availability of short-term financing arrangements;
	•		changes in state sales or use tax collection requirements;
	•		recently enacted and proposed changes in securities laws and regulations;
	•		results of litigation; and
	•		risks that are otherwise described from time to time in our Securities and Exchange Commission reports, including but not limited to the items discussed in “Factors that Could Affect Future Results” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I Item 2 of this report.

We assume no obligation and do not intend to update any forward-looking statements.

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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 STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(in thousands)
(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

     We are a leading provider of information technology (“IT”) products and services to businesses in the United States, Canada and the United Kingdom. Our offerings include brand name computing products, advanced IT services and outsourcing of business processes. Our business is organized along four operating segments:

	•		Single source provider of computing products and services – North America (referred to as “Insight North America”);
	•		Direct marketer of computing products and services – United Kingdom (referred to as “Insight UK”);
	•		Business process outsourcing provider (referred to as “Direct Alliance”); and
	•		Other: Internet service provider (referred to as “PlusNet”).

     Insight North America is one of the largest IT products and services resellers in North America, offering a broad line of more than 200,000 brand name products primarily to businesses in the United States and Canada. Insight North America also offers its United States customers IT services such as advanced integration, custom configuration, network design, deployment and installation, as well as third-party services such as warranties, training and leasing. Insight North America sells these products and services through a variety of means including a staff of customer-dedicated account executives utilizing proactive outbound telephone-based sales, a customer-focused face-to-face field sales force, electronic commerce (primarily the Internet) and marketing.

     Insight UK is a direct marketer of IT products, offering a broad line of more than 70,000 brand name products to businesses in the United Kingdom. Insight UK sells these products through a variety of means including a staff of customer-dedicated account executives utilizing proactive outbound telephone-based sales, a customer-focused face-to-face field sales force, a comprehensive catalog mailed to regular and prospective buyers, electronic commerce (primarily the Internet) and marketing.

     Direct Alliance provides marketplace solutions in the areas of logistics and supply chain management, financial services, direct sales and channel management, direct marketing and analytics using proprietary technology, infrastructure and processes. Direct Alliance’s services enable manufacturers of brand name products to sell directly to customers and support existing indirect sales channels in a cost-effective and timely manner.

     PlusNet offers broadband and dial-up Internet access to businesses and consumers in the United Kingdom.

2.

Basis of Presentation

     In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly our financial position as of March 31, 2003, the results of operations for the three months ended March 31, 2003 and 2002, and the cash flows for the three months ended March 31, 2003 and 2002. The condensed consolidated balance sheet as of December 31, 2002 was derived from the audited consolidated financial statements at such date. 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.

     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 our Annual Report on Form 10-K for the year ended December 31, 2002.

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

     The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

     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.

     References to “the Company,” “we,” “us,” “our” and the like refer to Insight Enterprises, Inc. and its consolidated subsidiaries, unless the context otherwise requires. References to Comark refer collectively to Comark, Inc. and Comark Investments, Inc. References to Action refer to Action plc and references to Kortex refer to Kortex Computer Center ltd.

3.

Earnings Per Share

     Our basic earnings per share (“EPS”) is calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period. Diluted EPS includes additional dilution from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options.

     The reconciliation of the numerators and denominators of the basic and diluted EPS calculations were as follows for the three-month periods ended March 31, 2003 and 2002:

4.

Financing Arrangements

     Our financing arrangements include a $200,000,000 accounts receivable securitization program, a $30,000,000 revolving line of credit and a $40,000,000 inventory financing facility.

     We have entered into an agreement to sell trade receivables periodically to a special purpose accounts receivable and financing entity (the “SPE”), which is exclusively engaged in purchasing trade receivables from us. The SPE is a wholly-owned, bankruptcy-remote entity that we have consolidated in our financial statements. The SPE funds its purchases by selling undivided interests in up to $200,000,000 of eligible receivables to a multi-seller conduit administered by an independent financial institution. The sales to the conduit do not qualify for sale treatment under SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” and therefore the receivables remain recorded on our condensed consolidated financial statements. At March 31, 2003, the SPE owned $290,184,000 of receivables that are recorded at fair value and are included in our

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

condensed consolidated balance sheet, of which $153,400,000 was eligible for funding. The facility expires December 30, 2003 and accordingly, the $30,000,000 outstanding at March 31, 2003 is recorded as short-term debt. Interest is payable monthly and the interest rate on borrowed funds as of March 31, 2003 was 1.86%. We also pay a commitment fee on the facility equal to 0.35% of the unused balance. At March 31, 2003, $123,400,000 was available under the facility.

     As of March 31, 2003, we had no amounts outstanding under our $30,000,000 revolving line of credit. The line of credit bears interest, payable quarterly, at a rate chosen by us among available rates subject to our leverage ratio and other terms and conditions. The available rates are the financial institution’s floating rate or the LIBOR based rate (4.65% and 3.45%, respectively at March 31, 2003). Any amounts outstanding would be recorded as long-term liabilities. The credit facility expires on December 31, 2005. We have an outstanding letter of credit that reduces the availability on this line of credit by $10,000,000. At March 31, 2003, $20,000,000 was available under the line of credit.

     Our $40,000,000 secured inventory facility can be used to facilitate the purchases of inventories from certain suppliers and amounts outstanding are classified on the balance sheet as accounts payable. As of March 31, 2003, there was $6,536,000 outstanding under the inventory facility and $33,464,000 was available. This facility is non-interest bearing if paid within its terms and expires December 31, 2005.

     The facilities contain various covenants including the requirement that we maintain a specified amount of tangible net worth and do not exceed leverage and minimum fixed charge requirements. We were in compliance with all such covenants at March 31, 2003.

5.

Income Taxes

     The effective tax rate was approximately 28.2% for the three-month period ended March 31, 2003 and 36.6% for the three-month period ended March 31, 2002. Our effective tax rate differs from the United States federal statutory rate of 35% primarily because of state income taxes, net of federal income tax benefit, income recorded for the reduction of certain UK liabilities assumed in connection with a previous acquisition which were not taxable and lower tax rates on earnings in Canada and the United Kingdom.

6.

Goodwill

     The changes in the carrying amount of goodwill for the three months ended March 31, 2003 are as follows (in thousands):