Good afternoon. My name is Ally and I will be your conference operator today. At this time I’d like to welcome everyone to the Insight Enterprises Incorporated Third Quarter Earnings Conference Call. [Operator Instructions] I’d now like to turn the conference over to your host Ms. Glynis Bryan, Chief Financial Officer. Ms. Bryan, you may begin your conference.

Thank you. Welcome everyone and thank you for joining the Insight Enterprises conference call. Today we will be discussing the company’s operating results for the quarter ended September 30, 2012. I’m Glynis Bryan, Chief Financial Officer of Insight, and joining me is Ken Lamneck, President and Chief Executive Officer. If you do not have a copy of the earnings release that was posted this afternoon and filed with the Securities and Exchange Commission on Form 8-K you will find it on our website at Insight.com under Investor Relations section. Today’s call including the question-and-answer period is being webcast via Investor Relations page of our website at Insight.com. An archived copy of the conference call will be available approximately 2 hours after completion of the call and will remain on our website for a limited time. This conference call and the associated webcast contain time sensitive information that is accurate only as of today October 31, 2012. This call is a property of Insight Enterprises, any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Insight Enterprises is strictly prohibited. In today’s conference call we will reference the company’s return on invested capital or ROIC for the period ended September 30, 2011 and 2012. A computation of which can be found on our website at Insight.com under the Investor Relations section. Finally, let me remind you about forward-looking statements that will be made on today’s call. All forward-looking statements that are made in this conference call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in today’s press release and in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2011. With that I will now turn the call over to Ken to give you an overview of our third quarter 2012 operating results. Ken?

Hello everyone. Thank you for joining us today to discuss our third quarter 2012 operating results. In the third quarter softer macro economic conditions continue to affect our top line results but we focus on the profitability of our business and a continued cost control which helps us deliver double-digit growth in earnings for the quarter. Specifically, consolidated net sales decreased 5% to 1.18 billion down from 1.24 billion in the third quarter of last year. In a constant currency basis consolidated net sales decreased 3%. Gross profit was 167.6 million up 3% year-over-year and gross margin was 14.2% an increase of 100 basis points from the third quarter of 2011. Earnings from operations increased 10% to 30.7 million or 2.6% of net sales compared to 27.9 million or 2.3% of net sales in the same quarter of 2011. Net earnings increased 13% year-to-year to 19.4 million and diluted earnings per share increased to $0.43 compared to $0.38 in the third quarter of 2011. And we achieved return on invested capital of 11.1% in the third quarter which is up 10 basis points year-over-year. In North America, net sales were down year-to-year reflecting continued softness and spending by our largest clients, but we are going to see the benefits of profitability initiatives which contributed to our higher gross margin performance in the quarter. This combined with continued discipline in managing our cost led to a 15% increase in earnings from operations in North America for the quarter. As we look out at the balance of 2012 into 2013, we are focused on returning to positive top line growth in this segment. We have invested in our Insight sales force over the past few years and have seen good improvement in the top line performance and profitability of the Insight sales…

Thank you, Ken. Starting with North America. Net sales were $869 million in the third quarter down 5% year-to-year. Sales in our hardware category decreased 6% year-to-year, software sales decreased 1% and services sales decreased 10% reflecting lower volume primarily in the large enterprise client group. Despite our lower sales gross profit in North America increased 2% year-over-year to $117 million and gross margin increased to 100 basis points to 13.5%. This increase was due to an increase in gross product margins due to business and client mix in the quarter and to the effects of our profitability initiative. Also contributing to gross margin improvement was increase in fees from enterprise agreements and a higher mix of more software services sales. Selling and administrative expenses for North America in the third quarter decreased 2% to $88 million. And as a percentage of sales increased 30 basis point to 10.1%. These results include the recovery of $2 million of legal fees incurred in prior period. Excluding this recovery SG&A expenses in North America were basically flat year-to-year. We also recorded $916,000 in severance and restructuring expenses in this segment in the third quarter compared to $476,000 in the same period last year. Earnings from operations in North America were $28.3 million or 3.3% of net sales in the third quarter of 2012 up 15% and 60 basis points from the $24.6 million or 2.7% of net sales reported in the same quarter last year. Moving onto AMEA. Our AMEA operating segment reported net sales of $277 million down 4% in U.S. dollars. In constant currency net sales increased 2%. Also in constant currency sales of hardware grew 20% due to the effect of our recent acquisition of Inmac. Software sales decreased 10% year-to-year due to lower volumes across the entire region…

Looking into the fourth quarter we expect global demand trends to continue to be muted particularly for hardware products. We expect software sales to increase from third quarter due to seasonality in that category. And we expect diluted earnings per share of $0.52 to $0.59 in the fourth quarter and for the full-year we expect diluted earnings per share to be between $2.17 and $2.23. This outlook includes an effective tax rate of 36% to 38% for the fourth quarter and excludes severance and restructuring expenses incurred during the year and the non-operating gain on an acquisition recorded in the first quarter. Thank you again for joining us today, that concludes my comments and we will now open up the line for your questions.

[Operator Instructions] Your first question comes from Brian Alexander, Raymond James & Associates.

Maybe just a little bit more on the demand environment, obviously the revenue was weak this quarter, we have seen weakness across obviously all of tech, but you alluded to large accounts spending being disproportionately weaker, so I was just wondering within the context of the North American sales decline of 5% if you can maybe parse out how much of that was large account, how much of that was SMB. And then just maybe talk about linearity during the quarter, did it get weaker as the quarter progress and if you have seen any recovery so far in October?

So, Brian where we can stated that of course is that, when we look at our the investments of course that we made our Insight sales organization which really covers that sort of small and medium account base then we do have certainly above market growth when we do all of the announces in the number so it certainly was field related which to us of course is large and enterprise type clients. As we look at it by verticals we saw certainly softness in the finance vertical and the retail vertical and then we also saw good strength actually in manufacturing that surprises -- that was pretty strong. And then of course I think depended how much part of public sector you are talking about there is certainly some softness in and of course there is also seasonality in that as well. But that’s how we -- really sort of North America played out for us.

And then in terms of linearity during the quarter and what you are seeing so far in October and I realize the last couple of days have probably been impacted by the storm in the northeast?

Yes, definitely, I think Brian which was consistent, we were tracking with what we heard certainly without the industry that September, certainly it didn’t have the strong finish that’s usually associated with September and that it certainly was a little bit more muted and we think that same trend is continuing at this point into the fourth quarter.

And then maybe if you could just talk about products that were relatively better and worse in North America as well as in Europe. And then also Glynis do you have a pro forma organic revenue number for Europe, I realized it's clouded by currency and by the acquisition of Inmac?

We did actually see strength, we saw growth in the desktop notebook market which I know it's been under certainly lot of fire, but we did actually see that category of products actually growth quarter-over-quarter. We saw the server market relatively server and storage market relatively flat. We did see some decline in the networking space for us and in the software area we saw actually in the large account area we definitely saw that software certainly didn’t have the normal trajectory that we normally see and that was little bit down in large accounts. And then Glynis you just want to ...

Brian your question around Inmac in Europe. Inmac contributed about $27 million of sales in the third quarter and excluding the effect of Inmac organic sales in Europe would have been down 8% constant currency terms.

And then maybe back to software, Ken, do you think this is all just macro and cyclical and just difficulty in closing deals at the end of the quarter or is any part of the software weakness that you have seen and I think it was weaker in Europe than it was in North America and Asia. Is any of that tied to maybe customers moving to more of SaaS model or is that not part of the story.

No I'd say it's very early to talk about that moving especially in these large clients moving to a SaaS model. And we stay pretty close to that because we do have certainly a SaaS solution as we discussed with clients so we don't believe it's that. We think it's pretty much the comment that you made in regards to the trend in seasonality that we have been seeing there in that regard. Certainly Europe being weaker not unexpectedly then of course we were seeing in North America on the software front.

And then just finally if I look at kind of the implied earnings growth sequentially for Q4 obviously it's weaker than what you have seen historically. And I’m just trying to figure out how much of that is below seasonal revenue expectations versus maybe some reversal of the margin strength that you saw this quarter. And maybe Glynis you could talk about the gross margin strength that you saw sequentially up 100 basis points. I think most of your comments were referencing year-over-year. So, I’m just wondering if maybe we are going to see gross margins decline and if there was anything temporary unusual that helped you in the third quarter.

So, I think that what you will see in the fourth quarter gross margin is something that’s closer to our historical norms, so you are right in Q3 our gross margins were little bit higher than the norm that associated with the mix of business that we have around software versus hardware specifically in AMEA, the difference in software versus hardware in AMEA is little bit more dramatic than it is here. So, we had some strength in gross margins in AMEA related to the fact that we had some weakness in software in AMEA and hardware is a much stronger contributor to the quarter than software. That’s part of the explanation for what happened with margins in Q3. We are not anticipating that to happen in Q4, number one, Q4 is a seasonally strong software quarter. So, even if software remains weak there is going to be some recovery with regard to just the volume of deals that turnover and come up for renewal and our reset in the fourth quarter that we will not bear in the third quarter. So, software in AMEA will have a bigger impact on overall gross margins. So, in AMEA it was 15% plus, we would assume something in the 14-ish range of margin for AMEA for Q4 on a normal circumstance. What was your other part of your question?

I was just trying to get a sense for whether the gross margin coming down was a bigger factor to the below seasonal earnings guidance for Q4 if you are also assuming below seasonal revenue?

So, we are assuming that we are not going to see a budget flush currently in Q4. So, based on all of the indications that we have, based on feedback from clients, based on different economic indicators that are out there. We believe that clients are being conservative with regard to the spend and curtailing anything they view to be discretionary at this stage. So, I’m anticipating that we are going to see a budget flush at the end of this year. I’m not sure what the impact of the elections would be, I’m not sure what the impact of the recent disruptions in the northeast will be either in that analysis, but it's a combination of lower growth assumption specifically on the budget flush both in all of the geographies. More normalization of our gross margins and a little bit higher SG&A as we are still continuing to make investments in certain insurance self functions on a go forward basis, specifically in our field sales and our services operation.

[Operator Instructions] Your next question comes from Matt Sheerin, Stifel, Nicolaus.

So just following up on Brian’s question regarding the gross margin, obviously big quarter-to-quarter swing there in gross margin and that helps you. I understand that the mix particularly the mix in Europe with software down probably significantly, but also you said in more than one occasion, Ken that part of that the gross margin was due to what you would call profitability initiatives. Could you elaborate on that? Is it walking away from volume, low margin volume deals, are you getting better pricing or better deals from your distributors that you buy from, to what things are going into that?

So, on the profitability initiative it actually entails all of the things that you certainly mentioned there in that regard. So, it does include of course getting as we discuss historically more deal registration. It does also seen more prudent and not just taking empty calorie business just to get revenue. So, we are certainly been more disciplined around that business as well. The other components so profitability when you saw the 100 basis point increase in North America, a good portion that was the profitability initiatives. Another portion that is in the services side of the business even though that the revenue was down, we did see of course improved gross margin growth year-over-year from the services business. And then the third piece would be the effect of we did a good job in selling the enterprise agreements which comes into the higher margin. So, those 3 facets are the reasons why we are in North America business we are up 100 basis points. And as Glynis mentioned the reason we are up over 100 basis points in Europe was really had to do the effect of hardware gross margin it's higher than we see software gross margin there. So, that was the pretty much the sole reason why we saw that growth which again that will change in AMEA this quarter as we have a seasonally stronger fourth quarter for software.

And you said that you have expanded that IT system in Europe up to 6 countries, how many countries are you selling hardware now.

So, we started off on selling hardware in the Netherlands. We then moved to France, Germany and of course we have always been selling hardware in the U.K. So, we are actively selling in those countries and there is Ireland, we are up and running, have the capability as well. And then you will start to see us now as you know in the next 2 quarters, we will be migrating that system to the rest of the European business. And then we will determine specifically which countries we actually want to sell hardware into. Anticipating your next question on the IT projects, we have going out in North America; they are going actually very much according to the plan. So, we are into the third phase of the project here. So, the first phase was conversion of services business in the second quarter which went successfully onto SAP. We also had converted our whole organization onto the SAP CRM tool as well as additionally part of our public sector business is now fully migrated to that system. And the last phase that we will go through over the remaining part of this quarter into next quarter will be the software business being converted. And we will do that over a 5 month period just because there is so many clients that we have EDI connections with will do that in a very disciplined fashion to make sure that our clients are completely sync-in and they are not missing to be from a service level point of view. And then the other phase of course will be the converter or Canadian operation over to this new system. So, things are moving along smoothly and very much in accordance to our planning that we originally laid out.

And then question on the expenses, I know you mentioned Glynis, I believe 900,000 plus in charges -- restructuring charges in North America. Does that imply there is cost coming out or is it just restructuring to improve, I know you did some sales restructuring and things like that. You also talked about adding some technical sales doing some sales expansion in Europe. So, what should we think about the actual SG&A dollars next quarter and as we move into 2013?

To answer your question the severance charge that we took was related to certain initiatives that we contemplate occurring in next year 2013 as we get the IT system here in North America implemented and stabilized and we start optimizing it next year. So, that’s the charge that we took now in anticipation of certain events that will occur in 2013. As it relates to the fourth quarter specifically, I don't think that you should anticipate that there is going to be savings as a result of the charge as I just said in the fourth quarter. We are actually making concerted effort with regard to investments in our sales efforts, both on the inside and expanding that to include the field sales and we -- as you mentioned earlier we are also looking at investing in technical resources in certain of our key markets to drive sales optimization and sales growth with our key partners in selected markets. So, I think that you should anticipate that potentially our projected SG&A will increase slightly in the fourth quarter, that’s our seasonal increase that would occur there anyway just related to the variable component of it. And going into 2013 we are reinvesting much of the savings that we are going to be getting from the systems initiatives in our sales and investment and technical services activity.

Ken, I know that you are an Apple reseller and tablets are doing very well for the channel, what is the margin profile of those products versus notebooks for you and is that impacting margins at all?

The tablet market for that is probably similar to what you see in the notebook sale, because you typically were seeing most of these selling in pretty good sized volume. So, they are similar to what we are seeing margin-wise on that. So, the real key in that business of course is being able to get the services with it and to do deployments in those type of things. So, that’s what makes that business attractive as being able to complement it with services that clients needs in and around that.

So net-net not a big difference.

No.

And there are no further questions at this time.

Okay. Thank you very much for joining us.

Thank you for participating in today’s conference call, you may now disconnect.