News Column

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

August 1, 2014

AND RESULTS OF OPERATIONS

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.

Quarterly Overview We are a global provider of information technology ("IT") hardware, software and services solutions to businesses and public sector institutions in North America, Europe, the Middle East, Africa ("EMEA") and Asia-Pacific ("APAC"). Our offerings in North America and select countries in EMEA 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. Consolidated net sales were consistent at $1.4 billion in the three months ended June 30, 2014 and 2013. Second quarter sales results were primarily driven by improved operating trends and financial results in our EMEA segment, including double digit growth in hardware sales partly offset by lower software sales, and strong results in our APAC segment during the quarter, including higher services sales. These positive top line results were partly offset by declines in all product categories in our North America segment. Software comparisons year over year, particularly in North America, were negatively affected by a higher mix of transactions which are recorded on a net basis during the quarter. Consolidated gross profit increased 2% year over year to $194.6 million, with gross margin increasing approximately 20 basis points year over year to 13.7%, driven by strong gross margin performance in North America. Additionally, we continued to tightly manage discretionary expenses globally. Our second quarter of 2014 results include a non-cash charge of $5.2 million ($3.2 million, net of tax), including an impairment loss of $4.6 million and accelerated depreciation of $620,000, to reduce the carrying amount of our owned real estate in Bloomingdale, Illinois that is currently held for sale to its estimated fair value less costs to sell. Our consolidated results of operations for the second quarter of 2014 also include severance expense, net of adjustments, totaling $310,000, $179,000 net of tax, compared to $3.2 million, $2.6 million net of tax, recorded during the second quarter of 2013. All of this resulted in a 4% year over year increase in earnings from operations. On a consolidated basis, we reported earnings from operations of $46.5 million, net earnings of $27.2 million and diluted earnings per share of $0.66 for the second quarter of 2014. This compares to earnings from operations of $44.6 million, net earnings of $26.5 million and diluted earnings per share of $0.62 for the second quarter of 2013. Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.



Details about segment results of operations can be found in Note 12 to the Consolidated Financial Statements in Part I, Item 1 of this report.

As previously disclosed, our largest software partner made changes to its channel incentive program beginning in October 2013. The changes vary in substance and timing across this partner's offerings. Some of the changes became effective in the fourth quarter of 2013, and some become effective as client contracts renew under their stated terms over the next few years. We are executing well globally against our plans to mitigate the adverse effect of these partner program changes in the software category. As a result, we now believe that we will receive between $10 and $15 million less in incentives from this partner in the full year 2014 compared to 2013, with the majority of the effect to be realized in the back half of the year. 18



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our consolidated financial statements, the changes in certain key items in those consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2013. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors. There have been no changes to the items disclosed as critical accounting estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013. Results of Operations The following table sets forth for the periods presented certain financial data as a percentage of net sales for the three and six months ended June 30, 2014 and 2013: Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Costs of goods sold 86.3 86.5 86.4 86.6 Gross profit 13.7 13.5 13.6 13.4



Selling and administrative expenses 10.4 10.1 11.0 10.9

Severance and restructuring expenses 0.0 0.3



0.0 0.2

Earnings from operations 3.3 3.1



2.6 2.3

Non-operating expense, net 0.2 0.0



0.2 0.1

Earnings before income taxes 3.1 3.1 2.4 2.2 Income tax expense 1.2 1.2 0.9 0.8 Net earnings 1.9 % 1.9 % 1.5 % 1.4 % We experience certain seasonal trends in our sales of IT hardware, software and services. Software sales are typically higher in our second and fourth quarters, particularly the second quarter; business clients, particularly larger enterprise businesses in the U.S., tend to spend more in our fourth quarter, as they utilize their remaining capital budget authorizations, and less in the first quarter; sales to the federal government in the U.S. are often stronger in our third quarter, while sales in the state and local government and education markets are stronger in our second quarter; and sales to public sector clients in the United Kingdom are often stronger in our first quarter. These trends create overall seasonality in our consolidated results such that sales and profitability are expected to be higher in the second and fourth quarters of the year. Throughout this "Results of Operations" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations," we refer to changes in net sales, gross profit and selling and administrative expenses in EMEA and APAC excluding the effects of foreign currency movements. In computing these change amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the average translation rate for the current period. 19



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Net Sales. Net sales for the three months ended June 30, 2014 remained flat compared to the three months ended June 30, 2013 at $1.4 billion. Net sales for the six months ended June 30, 2014 increased 1% compared to the six months ended June 30, 2013. Our net sales by operating segment were as follows (dollars in thousands): Three Months Ended Six Months Ended June 30, % June 30, % 2014 2013 Change 2014 2013 Change North America $ 889,252$ 923,063 (4 %) $ 1,669,934$ 1,670,067 - EMEA 446,857 421,116 6 % 834,800 808,027 3 % APAC 81,788 72,368 13 % 127,693 120,075 6 % Consolidated $ 1,417,897$ 1,416,547 - $ 2,632,427$ 2,598,169 1 % Net sales in North America decreased 4%, or $33.8 million, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Net sales of hardware, software and services decreased 1%, 8% and 7%, respectively, year to year. Sales in the hardware category were down due to lower sales of data center products to large enterprise and public sector clients. Software sales comparisons reflect a higher mix of software maintenance sales compared to the prior year, which were recorded net of related costs within the net sales line item of our financial statements. The decline in services sales was attributable to fewer technical service engagements in the second quarter of 2014. Net sales in North America remained flat for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 at $1.7 billion. On a year to date basis, net sales of hardware increased 1% year over year, while net sales of software and services declined less than 1% and 10%, respectively, year to year. Net sales in EMEA increased 6%, or $25.7 million, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Excluding the effects of foreign currency movements, net sales increased 1% compared to the second quarter of last year. Net sales of hardware and services increased 28% and 6%, respectively, year over year, while net sales of software declined 2% year to year, all in U.S. dollars. Excluding the effects of foreign currency movements, hardware net sales increased 18% year over year, services net sales were flat and software net sales declined 6% compared to the second quarter of 2013. The increase in hardware net sales was due primarily to higher volume across all client groups, with year over year growth most notably with mid-market and public sector clients in the United Kingdom. The decline in software net sales was due primarily to lower volume of software sales to our existing public sector clients. Net sales in EMEA increased 3%, or $26.8 million for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Excluding the effects of foreign currency movements, net sales decreased 2% compared to the six months ended June 30, 2013. On a year to date basis, net sales of hardware increased 16% year over year, while net sales of software and services decreased by 2% and 3%, respectively, year to year, all in U.S. dollars. Excluding the effects of foreign currency movements, hardware net sales increased 8%, while net sales of software and services declined 7% and 9%, respectively. Net sales in APAC increased 13%, or $9.4 million, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Excluding the effects of foreign currency movements, net sales increased 16% compared to the second quarter of last year. The increase primarily resulted from a lower mix of software maintenance sales, which are recorded net of related costs within the net sales line item of our financial statements, during the three months ended June 30, 2014 compared to the three months ended June 30, 2013. 20



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Our APAC segment recognized net sales of $127.7 million for the six months ended June 30, 2014, an increase of 6% compared to the six months ended June 30, 2013 in U.S. dollars, 12% excluding the effects of foreign currency movements. The increase primarily resulted from a lower mix of software maintenance sales during the six months ended June 30, 2014 compared to the six months ended June 30, 2013 as well as higher volume with mid-market and public sector clients.



The percentage of net sales by category for North America, EMEA and APAC were as follows for the three months ended June 30, 2014 and 2013:

North America EMEA APAC Three Months Ended Three Months Ended



Three Months Ended

June 30, June 30, June 30, Sales Mix 2014 2013 2014 2013 2014 2013 Hardware 59 % 58 % 31 % 26 % 5 % 3 % Software 35 % 36 % 67 % 72 % 92 % 95 % Services 6 % 6 % 2 % 2 % 3 % 2 % 100 % 100 % 100 % 100 % 100 % 100 %



The percentage of net sales by category for North America, EMEA and APAC were as follows for the six months ended June 30, 2014 and 2013:

North America EMEA APAC Six Months Ended Six Months Ended Six Months Ended June 30, June 30, June 30, Sales Mix 2014 2013 2014 2013 2014 2013 Hardware 61 % 60 % 35 % 31 % 5 % 2 % Software 33 % 33 % 63 % 67 % 92 % 95 % Services 6 % 7 % 2 % 2 % 3 % 3 % 100 % 100 % 100 % 100 % 100 % 100 % Gross Profit. Gross profit for the three months ended June 30, 2014 increased 2% compared to the three months ended June 30, 2013, with gross margin increasing approximately 20 basis points to 13.7% for the three months ended June 30, 2014 compared to 13.5% for the three months ended June 30, 2013. For the six months ended June 30, 2014, gross profit increased 3% compared to the six months ended June 30, 2013, with gross margin increasing approximately 20 basis points to 13.6% for the six months ended June 30, 2014 compared to 13.4% for the six months ended June 30, 2013. Our gross profit and gross profit as a percentage of net sales by operating segment were as follows (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, % of % of % of % of 2014 Net Sales 2013 Net Sales 2014 Net Sales 2013 Net Sales North America $ 125,038 14.1 % $ 124,664 13.5 % $ 232,451 13.9 % $ 227,191 13.6 % EMEA 56,086 12.6 % 54,238 12.9 % 105,407 12.6 % 102,848 12.7 % APAC 13,475 16.5 % 12,025 16.6 % 20,486 16.0 % 19,025 15.8 % Consolidated $ 194,599 13.7 % $ 190,927 13.5 % $ 358,344 13.6 % $ 349,064 13.4 % North America's gross profit for the three months ended June 30, 2014 remained relatively flat compared to the three months ended June 30, 2013; however, as a percentage of net sales, gross margin increased approximately 60 basis points to 14.1% for the second quarter of 2014 from 13.5% in the second quarter of 2013. The increase was primarily attributable to a 47 basis point increase in product margin, which includes vendor funding and freight. The increase in product margin resulted from an increase in margin from hardware product sales and an increase in vendor funding due to improvements in the mix of hardware sales with key strategic partners year over year. In addition, improved inventory management resulted in a decrease in the write-downs in inventories year to year, which increased gross margin by 8 basis points, and margin generated by services improved 5 basis points year over year. 21



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) North America's gross profit for the six months ended June 30, 2014, increased 2% compared to the six months ended June 30, 2013. As a percentage of net sales, gross margin increased approximately 30 basis points to 13.9% from 13.6%, year over year, reflecting a 47 basis point improvement in year to date product margin, which includes vendor funding and freight, driven primarily by an increase in margin from hardware product sales and an increase in vendor funding year over year. The increase in product margin year over year was offset partially by a decline in margin from agency fees for enterprise software agreements of 22 basis points due to the negative effect of program changes from our largest software partner offset partially by the positive effect of a higher mix of software maintenance sales recorded on a net basis in the six months ended June 30, 2014 compared to the six months ended June 30, 2013. EMEA's gross profit increased 3% in U.S. dollars for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Excluding the effects of foreign currency movements, gross profit declined 3% compared to the second quarter of last year. Gross margin decreased approximately 30 basis points to 12.6% for the second quarter of 2014 from 12.9% in the second quarter of 2013. A net decrease in product margin, which includes vendor funding and freight, of 33 basis points was driven by a decrease in vendor funding resulting from software partner program changes year to year and a decrease in software product margin due to the relative mix of software deals transacted during the three months ended June 30, 2014 compared to the three months ended June 30, 2013. These decreases in product margin were partially offset by an improvement in hardware product margin as hardware sales, which are transacted at higher margins, increased as a percentage of total sales year over year. EMEA's gross profit increased 2% in U.S. dollars for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Excluding the effects of foreign currency movements, gross profit declined 3% compared to the first six months of last year. As a percentage of net sales, gross margin for the six month periods decreased to 12.6% from 12.7% year to year, due primarily to a decrease in margin generated by services of 11 basis points year to year. Year over year increases in hardware product margin during the six months ended June 30, 2014 compared to the first six months of 2013 were fully offset by decreases in vendor funding resulting from software partner program changes year to year. APAC's gross profit increased 12% for the three months ended June 30, 2014 compared to the three months ended June 30, 2013, with gross margin decreasing to 16.5% for the three months ended June 30, 2014, compared to 16.6% for the three months ended June 30, 2013. Excluding the effects of foreign currency movements, gross profit increased 15% compared to the second quarter of last year. The decrease in gross margin in the second quarter of 2014 compared to the second quarter of 2013 was due primarily to a lower mix of fees from enterprise software agreements year to year offset partially by an increase in vendor funding and an increase in services net sales year over year. APAC's gross profit increased 8% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Excluding the effects of foreign currency movements, gross profit increased 14% compared to the first six months of last year. As a percentage of net sales, gross margin increased approximately 20 basis points year over year, due primarily to an increase in vendor funding offset partially by a lower mix of fees from enterprise software agreements in the six months ended June 30, 2014 compared to the first six months of 2013. 22



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Operating Expenses. Selling and Administrative Expenses. Selling and administrative expenses increased $4.7 million, or 3%, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. For the six months ended June 30, 2014, selling and administrative expenses increased $6.1 million, or 2%, compared to the six months ended June 30, 2013. Our selling and administrative expenses as a percent of net sales by operating segment were as follows (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, % of % of % of % of 2014 Net Sales 2013 Net Sales 2014 Net Sales 2013 Net Sales North America $ 94,558 10.6 % $ 90,295 9.8 % $ 183,739 11.0 % $ 179,491 10.7 % EMEA 46,030 10.3 % 46,309 11.0 % 93,135 11.2 % 92,065 11.4 % APAC 7,222 8.8 % 6,554 9.1 % 13,365 10.5 % 12,590 10.5 % Consolidated $ 147,810 10.4 % $ 143,158 10.1 % $ 290,239 11.0 % $ 284,146 10.9 % North America's selling and administrative expenses increased 5%, or $4.3 million, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 and increased approximately 80 basis points year over year as a percentage of net sales to 10.6%. As discussed in Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report, our second quarter of 2014 results include non-cash charges of $5.2 million, including an impairment loss of $4.6 million and accelerated depreciation of $620,000, to reduce the carrying amount of our owned real estate in Bloomingdale, Illinois that is currently held for sale to its estimated fair value less costs to sell. IT contract labor expenses decreased by $1.2 million year to year resulting from the completion of our North America IT systems integration project in 2013. Higher teammate-related expenses were offset partially by reduced spending in other expense categories, such as professional services. North America's selling and administrative expenses increased 2%, or $4.2 million, for the six months ended June 30, 2014 compared to the six months ended June 30, 2013, due primarily to the non-cash charges related to the Bloomingdale, Illinois real estate discussed above, higher teammate benefit expenses that increased approximately $1.8 million year over year due to higher health benefits claims in the six months ended June 30, 2014 and higher variable compensation on higher gross profits. These increases in selling and administrative expenses were partially offset by reduced spending in other expense categories, such as professional services. EMEA's selling and administrative expenses decreased 1%, or $279,000, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 and decreased approximately 70 basis points year to year as a percentage of net sales to 10.3%. Excluding the effects of foreign currency movements, selling and administrative expenses declined 7% compared to the second quarter of last year. The year to year decrease was primarily driven by a decrease in support salaries and wages due to restructuring actions in prior periods. EMEA's selling and administrative expenses increased 1%, or $1.1 million, for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Excluding the effects of foreign currency movements, selling and administrative expenses declined 4% compared to the first six months of last year. The year to year decrease was primarily driven by a decrease in support salaries and wages due to restructuring actions in prior periods, partially offset by higher variable compensation expense. APAC's selling and administrative expenses increased 10%, or $668,000, for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 but decreased as a percentage of net sales by approximately 30 basis points year to year to 8.8%. Excluding the effects of foreign currency movements, selling and administrative expenses increased 15% compared to the second quarter of last year. The increase was primarily driven by an increase in variable compensation expense on higher sales. APAC's selling and administrative expenses increased 6%, or $775,000, for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Excluding the effects of foreign currency movements, selling and administrative expenses increased 14% compared to the first six months of last year due to increases in variable compensation and expenses resulting from our planned investments in the new IT system in the region. 23



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Severance and Restructuring Expenses. During the three months ended June 30, 2014, EMEA and APAC recorded severance expense, net of adjustments, of approximately $215,000 and $109,000, respectively. North America recorded a net reduction of severance expense of $14,000 during the quarter as current period severance charges were more than offset by changes in estimates of previous accruals as cash payment were made. During the six months ended June 30, 2014, North America, EMEA and APAC recorded severance expense, net of adjustments, totaling $63,000, $475,000 and $109,000, respectively. The charges were related to the elimination of certain positions as part of a re-alignment of roles and responsibilities. Comparatively, during the three months ended June 30, 2013, North America and EMEA recorded severance expense, net of adjustments, of approximately $1.0 million and $2.2 million, respectively, and during the six months ended June 30, 2013, North America and EMEA recorded severance expense, net of adjustments, totaling $2.0 million and $3.9 million, respectively.



Non-Operating (Income) Expense.

Interest Income. Interest income for the three and six months ended June 30, 2014 and 2013 was generated from interest earned on cash and cash equivalent bank balances. The decrease in interest income year to year is primarily due to lower average interest-bearing cash and cash equivalent balances during the three and six months ended June 30, 2014. Interest Expense. Interest expense for the three and six months ended June 30, 2014 and 2013 primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facility. Interest expense for the three and six months ended June 30, 2014 decreased 4%, or $55,000, and 7%, or $215,000, respectively, compared to the three and six months ended June 30, 2013. The decrease was due primarily to lower average daily balances on our debt facilities in the 2014 periods and a decrease in imputed interest under our inventory financing facility. Imputed interest under our inventory financing facility was $552,000 and $1.1 million for the three and six months ended June 30, 2014, respectively, compared to $602,000 and $1.2 million for the three and six months ended June 30, 2013, respectively. This decrease was due to lower outstanding balances, partially offset by increases in our average incremental borrowing rate used to compute the imputed interest amounts. For a description of our various financing facilities, see Note 3 to our Consolidated Financial Statements in Part I, Item 1 of this report. Net Foreign Currency Exchange Gains/Losses. These gains/losses result from foreign currency transactions, including gains/losses on foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The change in net foreign currency exchange gains/losses is due primarily to the underlying changes in the applicable exchange rates, mitigated by our use of foreign exchange forward contracts to hedge certain non-functional currency assets and liabilities against changes in exchange rate movements.



Other Expense, Net. Other expense, net, consists primarily of bank fees associated with our cash management activities.

Income Tax Expense. Our effective tax rate for the three months ended June 30, 2014 was 38.6% compared to 39.6% for the three months ended June 30, 2013. Our effective tax rate for the six months ended June 30, 2014 was 38.8% compared to 37.0% for the six months ended June 30, 2013. The decrease in our effective tax rate for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 was primarily due to higher losses in certain foreign jurisdictions in the prior year period, resulting in an increase in the valuation allowance for deferred tax assets related to these foreign operating losses, which increased the effective tax rate for the second quarter of the prior year. The increase in our effective tax rate for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 was primarily due to the recognition of certain tax benefits related to the re-measurement or settlement of specific uncertain tax positions during the first quarter of 2013, which decreased the effective tax rate for the first six months of the prior year. 24



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources



The following table sets forth certain consolidated cash flow information for the six months ended June 30, 2014 and 2013 (in thousands):

Six Months Ended June 30, 2014 2013 Net cash provided by operating activities $ 103,715 $



87,750

Net cash used in investing activities (5,342 )



(10,529 )

Net cash used in financing activities (77,216 )



(79,126 )

Foreign currency exchange effect on cash balances 1,953 (8,049 )

Increase (decrease) in cash and cash equivalents 23,110 (9,954 )

Cash and cash equivalents at beginning of period 126,817 152,119

Cash and cash equivalents at end of period $ 149,927$ 142,165

Cash and Cash Flow Our primary uses of cash during the six months ended June 30, 2014 were to fund working capital requirements, to pay down our debt balances, to repurchase shares of our common stock and for capital expenditures. Operating activities provided $103.8 million in cash for the six months ended June 30, 2014, an 18% increase from the six months ended June 30, 2013. We had combined net repayments on our long-term debt facilities of $41.5 million during the six months ended June 30, 2014. Capital expenditures were $5.3 million in the six months ended June 30, 2014, a 49% decrease from the prior year period, reflecting lower IT investments year over year. Cash balances in the six months ended June 30, 2014 were positively affected by $2.0 million as a result of foreign currency exchange rates, compared to a negative effect of $8.0 million in the prior year period. Net cash provided by operating activities. Cash flow from operations for the six months ended June 30, 2014 and 2013 reflect our net earnings, adjusted for non-cash items such as depreciation, amortization, stock-based compensation expense and write-offs and write-downs of assets, as well as changes in asset and liability balances. For the six months ended June 30, 2014, the increases in accounts receivable and accounts payable can be primarily attributed to the seasonal increase in net sales from the fourth quarter to the second quarter, which results in higher accounts receivable and accounts payable balances as of June 30, compared to December 31. For the 2014 period, the increase in inventories is primarily attributable to an increase in inventory levels at June 30, 2014 to support specific client engagements and to hardware sale transactions in transit to clients as of June 30, 2014 such that delivery was not deemed to have occurred until the product was received by the client in early July 2014. The decrease in accrued expenses and other liabilities is primarily attributable to decreases in accrued VAT and sales taxes as of June 30, compared to December 31, due to the relative timing of related payments and to the reclassification of certain long-term liabilities to accounts payable as of June 30, 2014, as amounts became payable to partners under their contractual terms. For the 2013 period, we also anticipated seasonal increases in accounts receivable and accounts payable. However, the accounts receivable and accounts payable balances at December 31, 2012 reflected a single significant sale transacted with a public sector client in North America late in December 2012, which increased the December 31, 2012 accounts receivable and accounts payable balances. As a result, accounts receivable declined instead of increasing during the six months ended June 30, 2013, and accounts payable increased less than the seasonal norm during the six months ended June 30, 2013. The increase in inventories in the 2013 period was primarily attributable to hardware sale transactions in transit to clients as of June 30, 2013 such that delivery was not deemed to have occurred until the product was received by the client in early July 2013 and to an increase in inventory levels at June 30, 2013 to support specific client engagements. The increase in other current assets in the 2013 period was primarily attributed to an overpayment of income taxes resulting in a receivable balance at June 30, 2013 and to the timing of the payment of certain prepaid expenses. 25



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)



Our consolidated cash flow operating metrics for the quarters ended June 30, 2014 and 2013 were as follows:

2014



2013

Days sales outstanding in ending accounts receivable ("DSOs") (a) 85

85

Days inventory outstanding ("DIOs") (b) 9



8

Days purchases outstanding in ending accounts payable ("DPOs")(c) (73 )

(75 )

Cash conversion cycle (days) (d) 21 18



(a) Calculated as the balance of accounts receivable, net at the end of the

period divided by daily net sales. Daily net sales is calculated as net sales

for the quarter divided by 91 days.

(b) Calculated as average inventories divided by daily costs of goods sold.

Average inventories is calculated as the sum of the balances of inventories

at the beginning of the quarter plus inventories at the end of the quarter

divided by two. Daily costs of goods sold is calculated as costs of goods

sold for the quarter divided by 91 days.

(c) Calculated as the balances of accounts payable, which includes the inventory

financing facility, at the end of the period divided by daily costs of goods

sold. Daily costs of goods sold is calculated as costs of goods sold for the

quarter divided by 91 days.

(d) Calculated as DSOs plus DIOs, less DPOs.

Our cash conversion cycle was 21 days in the quarter ended June 30, 2014 compared to 18 days in the quarter ended June 30, 2013. The year over year increase in our cash conversion cycle was driven by a two day decrease in DPOs period to period due to the timing of supplier payments during the respective quarters and to a one day increase in DIOs resulting from increased inventory levels during the quarter ended June 30, 2014 to support specific client engagements. We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms granted to our clients in order to take advantage of supplier discounts. We intend to use cash generated in the remainder of 2014 in excess of working capital needs to pay down our outstanding debt balances and support our capital expenditures for the year. We also may use cash to fund potential small acquisitions to add select capabilities and to repurchase shares of our common stock under our previously authorized share repurchase plan. Net cash used in investing activities. Capital expenditures of $5.3 million and $10.5 million for the six months ended June 30, 2014 and 2013, respectively, were primarily related to investments in our IT systems. We expect capital expenditures for the full year 2014 to be between $15.0 million and $20.0 million, primarily for our IT systems upgrade projects and other facility and technology related upgrade projects. Net cash used in financing activities. During the six months ended June 30, 2014 and 2013, we repurchased $29.7 million and $50.0 million, respectively, of our common stock in open market transactions. These repurchases were part of programs approved by our Board of Directors in October 2013 and February 2013, respectively. All shares repurchased were immediately retired. During the six months ended June 30, 2014, we had net combined repayments on our long-term debt under our revolving facility and our ABS facility that decreased our outstanding debt balance by $41.5 million, and we had net repayments of $6.6 million under our inventory financing facility during the period. During the six months ended June 30, 2013, we had net combined repayments on our long-term debt under our revolving facility and our ABS facility that decreased our outstanding debt balance by $27.0 million, and we had net borrowings of $362,000 under our inventory financing facility during the period. 26



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Our consolidated debt balance that can be outstanding at the end of any fiscal quarter under our revolving facility and our ABS facility is limited by certain financial covenants, particularly a maximum leverage ratio. The maximum leverage ratio is calculated as aggregate debt outstanding divided by the sum of the Company's trailing twelve month net earnings (loss) plus (i) interest expense, excluding non-cash imputed interest on our inventory financing facility, (ii) income tax expense (benefit), (iii) depreciation and amortization and (iv) non-cash stock-based compensation ("adjusted earnings"). The maximum leverage ratio permitted under the agreements is 2.75 times trailing twelve-month adjusted earnings. We anticipate that we will be in compliance with our maximum leverage ratio requirements over the next four quarters. However, a significant drop in the Company's adjusted earnings would limit the amount of indebtedness that could be outstanding at the end of any fiscal quarter to a level that would be below the Company's combined facility maximum amount. Based on the maximum leverage ratio as of June 30, 2014, the Company's combined debt balance that could have been outstanding under our revolving facility and our ABS facility was reduced from the maximum borrowing capacity of $550.0 million to $488.8 million, of which $25.0 million was outstanding at June 30, 2014. Our debt balance as of June 30, 2014 was $27.6 million, including our capital lease obligation for certain IT equipment and other financing agreements with financial intermediaries to facilitate the purchase of products from certain vendors. As of June 30, 2014, the current portion of our long-term debt relates solely to our capital lease and other financing obligations. Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation to the U.S. We do not provide for U.S. income taxes on the undistributed earnings of those of our foreign subsidiaries where earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely outside of the U.S. As of June 30, 2014, we had approximately $125.0 million in cash and cash equivalents in certain of our foreign subsidiaries where we consider undistributed earnings of these foreign subsidiaries to be indefinitely reinvested. As of June 30, 2014, the majority of our foreign cash resides in the Netherlands, Australia, and Canada. Certain of these cash balances could and will be remitted to the U.S. by paying down intercompany payables generated in the ordinary course of business. This repayment would not change our policy to indefinitely reinvest earnings of our foreign subsidiaries. We intend to use undistributed earnings for general business purposes in the foreign jurisdictions as well as to fund our IT systems, potential small acquisitions and various facility upgrades. We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our presently anticipated cash and working capital requirements for operations as well as other strategic investments over the next 12 months. We currently do not intend nor foresee a need to repatriate any foreign undistributed earnings. We expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating cash activities and cash commitments for investing and financing activities, such as capital expenditures and debt repayments, for at least the next 12 months.



Off-Balance Sheet Arrangements

We have entered into off-balance sheet arrangements, which include indemnifications. The indemnifications are discussed in Note 11 to the Consolidated Financial Statements in Part I, Item 1 of this report and that discussion is incorporated by reference herein. We believe that none of our off-balance sheet arrangements have, or are reasonably likely to have, a material current or future effect on our financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Pronouncements

The information contained in Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report concerning a description of recently issued accounting pronouncements which affect or may affect our financial statements, including our expected dates of adopting and the estimated effects on our results of operations and financial condition, is incorporated by reference herein. 27



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Table of Contents INSIGHT ENTERPRISES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)



Contractual Obligations

There have been no material changes in our reported contractual obligations, as described under "Contractual Obligations" in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013. 28



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INSIGHT ENTERPRISES, INC.


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