CDW Achieves Record First Quarter Results.VERNON HILLS Vernon Hill II (born circa 1946) is the founder and former chairman, president, and chief executive officer of Commerce Bancorp and Commerce Bank of Cherry Hill Township, New Jersey. , Ill. -- CDW CDW - data warehouse Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CDWC CDWC Computer Discount Warehouse (stock symbol) ): --Sales: $1.589 billion, up 7.7% year-over-year --Average daily sales: $24.822 million, up 7.7% year-over-year --Gross profit: $253.9 million, up 12.1% year-over-year --Net income: $61.7 million, up 0.5% year-over-year --Diluted earnings per share: $0.75, up 4.2% year-over-year CDW Corporation (NASDAQ:CDWC) achieved record first quarter sales, gross profit, net income and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of in the first quarter of 2006. Total sales in the first quarter of 2006 were $1.589 billion compared to $1.475 billion in the first quarter of 2005, an increase of 7.7 percent. Average daily sales in the first quarter of 2006 were $24.822 million compared to $23.048 million in the first quarter of 2005, representing a 7.7 percent increase. The first quarter of 2006 and the first quarter of 2005 both had 64 billing days. Gross profit for the first quarter of 2006 was $253.9 million compared to $226.4 million the first quarter of 2005, an increase of 12.1 percent. Net income increased 0.5 percent for the first quarter of 2006 to $61.7 million versus the prior year period, including the impact of the required implementation of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 123R ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R") relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc stock options as of January January: see month. 1, 2006. Diluted earnings per share were $0.75 in the first quarter of 2006, an increase of 4.2 percent compared to diluted earnings per share of $0.72 in the first quarter of 2005. The first quarter of 2006 included stock-based compensation expense of $2.6 million after tax ($4.2 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta ), or $0.03 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share due to the implementation of SFAS 123R. "We delivered a solid first quarter performance as we continued to take market share, deliver profitable growth, and maintain one of the strongest balance sheets in our industry, while returning $128 million to shareholders through share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. ," said John A. Edwardson, chairman and chief executive officer. "During the first quarter, we took significant steps to better serve our customers and position ourselves for future growth. We aligned our executive structure to support our growth strategies, completed the first full quarter of operations at our new Western distribution center in North Las Vegas, Nevada North Las Vegas is a city in Clark County, Nevada, United States. As of the 2000 census, the city had a total population of 115,488, with a Census Bureau estimate of 197,567 as of 2006, and a Clark County estimate of 202,520 as of July 1, 2006 [2]. , and launched the geographic realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of our corporate sales organization. Our expectation is to leverage these investments in the business as we progress through 2006 and beyond." First Quarter Highlights: --Total corporate sector sales in the first quarter of 2006 were $1.150 billion compared to $1.088 billion in the first quarter of 2005, representing a 5.7 percent increase. First quarter of 2006 average daily sales for the corporate sector were $17.972 million compared to $17.005 million in the first quarter of 2005. --Total public sector sales in the first quarter of 2006 were $438.4 million compared to $386.8 million in the first quarter of 2005, representing a 13.4 percent increase. First quarter of 2006 average daily sales for the public sector were $6.851 million compared to $6.043 million in the first quarter of 2005. --Product categories that achieved the strongest year-over-year unit volume growth for the quarter included notebook CPUs, software, video, memory, and input devices. --Direct web sales in the first quarter of 2006 were a record $501 million, representing a 14.8 percent increase compared to the same period a year ago, and comprised 31.5 percent of total sales. --Total March 2006 sales were $584.0 million compared to $541.8 million in March 2005, representing a 7.8 percent increase. March 2006 average daily sales were $25.392 million compared to $23.556 million in the prior period. March 2006 and March 2005 both had 23 billing days. The rate of growth for both the corporate and public sector segments in March 2006 was similar to each segment's respective rate of growth for the first quarter of 2006. Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. was 16.0 percent in the first quarter of 2006 compared to 15.4 percent in the same period of 2005. The increase was primarily due to stronger product margins, increased net service contract revenue and commission revenue, and a larger amount of cooperative advertising funds classified as a reduction of cost of sales. The positive impact from these items was partially offset by a lower level of vendor incentives due to changes by vendors in their programs. Selling and administrative expenses as a percentage of sales were 8.1 percent in the first quarter of 2006 compared to 6.9 percent in the first quarter of 2005. The increase in selling and administrative expenses in the first quarter of 2006 was primarily due to: --Costs of $5.0 million associated with the opening of the company's new distribution center in North Las Vegas, Nevada, and additional office space leased in Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. and Vernon Hills, Illinois Vernon Hills is a village in Lake County, Illinois, United States. The population was 20,120 at the 2000 census, and estimated to be 23,957 as of 2005. Vernon Hills serves as a retail hub for its surrounding area (Libertyville, Lake Forest, Mundelein, Lincolnshire). . As previously announced, these infrastructure investments are being made to position the company for future growth. --Stock-based compensation expense of $4.2 million due to the implementation of SFAS 123R, as previously announced. --Incremental payroll taxes Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. of $1.6 million on stock option exercises by coworkers. Approximately $1.0 million of this incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. expense was attributed to stock option exercises on stock options for which vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: was accelerated as of December December: see month. 31, 2005, for coworkers through the manager level. Approximately 1.4 million options were exercised in the first quarter of 2006, including 800,000 options on which vesting was accelerated as of December 31, 2005. Approximately 1.8 million options remain on which vesting was accelerated as of December 31, 2005. --Incremental discretionary profit-sharing profit-sharing Noun a system in which a portion of the net profit of a business is shared among its employees profit-sharing n → participación f de empleados en los beneficios expense of $1.0 million to the 401(k) plan for 2006 in the amount of $1,000 per coworker co·work·er or co-work·er n. One who works with another; a fellow worker. , per the previously announced modification to the company's stock option program. --A severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when expense of $1.5 million in connection with payments to several individuals who left the company in the first quarter of 2006. --Increased payroll costs as a result of continued investment in expanding CDW's sales force and more coworkers to support a larger and growing business. --Increased sales commission expense due to the achievement of a stronger gross profit margin compared to the prior year period. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 5.9 percent in the first quarter of 2006 compared to 6.6 percent in the first quarter of 2005. The decline in operating margin was primarily due to the implementation of SFAS 123R, costs associated with the modification to the company's stock option program, a severance expense, and investments for future growth, including costs for infrastructure and additional sales and support coworkers. The effective tax rate for the first quarter of 2006 was 37.4 percent compared to 38.9 percent for the first quarter of 2005. As previously announced, the company began collecting state sales taxes sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. from all taxable commercial customers effective April 1, 2005. As a function of collecting state sales taxes, CDW also began paying income taxes in these states. Due to differences in state income tax laws, including differences in how income is apportioned ap·por·tion tr.v. ap·por·tioned, ap·por·tion·ing, ap·por·tions To divide and assign according to a plan; allot: "The tendency persists to apportion blame as suits the circumstances" among states, the company's effective state income tax rate was lower in the first quarter of 2006 compared to the prior year period. Share Repurchase Activity and Announcement of New Share Repurchase Program During the first quarter of 2006, CDW repurchased 2.2 million shares of common stock at an average price of $57.68 per share for an aggregate purchase price of $128 million. The share repurchase activity in the first quarter of 2006 completed the share repurchase program approved in April 2005 for the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of approximately 4.5 million shares. CDW's Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a new share repurchase program of up to 5 million shares of Company stock, the fifth such program in the Company's history. The authorization The right or permission to use a system resource; the process of granting access. See access control. will enable the Company to offset any potential dilutive effects Dilutive effect Result of a transaction that decreases earnings per common share (EPS). from the exercise of stock options and to opportunistically reduce the total number of shares outstanding. The new repurchase program is expected to remain effective through April 30, 2008, unless earlier terminated by the Board or completed. The Company intends to hold the repurchased shares in treasury for general corporate purposes, including issuances under various employee stock option plans. Since 2001, CDW has returned approximately $775 million to shareholders through the repurchase of 15.5 million shares.
Recognition:
-- CDW was named No. 343 on FORTUNE Magazine's "FORTUNE 500"
list. In addition, the company scored within the top ten
percent of all FORTUNE 500 companies in several categories
measuring profitability and performance:
-- No. 29 in profit growth over the past ten years
-- No. 17 in revenue per dollar of assets
-- No. 32 in total return to shareholders for the past ten
years
-- CDW earned the top ranking in its industry in FORTUNE
magazine's "America's Most Admired Companies," as previously
announced. In the Wholesalers: Electronics and Office
Equipment industry, CDW ranked first in all eight attributes
measured, including innovation, employee talent, use of
corporate assets, social responsibility, quality of
management, financial soundness, long-term investment value,
and quality of products/services.
-- CDW was named by FORTUNE magazine to its annual "100 Best
Companies to Work For" list for the eighth straight year at
No. 34, as previously announced. This was the eighth
consecutive year CDW ranked in the top 40 on the list - a
record achieved by only four other organizations.
The company plans to release April sales on Tuesday Tuesday: see week. , May 9, 2006. April 2005 had 21 billing days and April 2006 will have 20 billing days. Forward Looking Statement Any forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. contained in this release are based on the Company's beliefs and expectations as of the date of this release and are subject to certain risks and uncertainties which may have a significant impact on the Company's business, operating results or financial condition. Should any risk or uncertainty materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described in forward-looking statements. Factors affecting the Company's business and prospects are discussed in the Company's filings with the Securities and Exchange Commission. About CDW CDW(R), ranked No. 343 on the FORTUNE 500, is a leading provider of technology solutions for business, government and education. CDW is a principal source of technology products and services including top name brands such as Adobe adobe (ədō`bē): see rammed earth. adobe Handmade sun-dried bricks formed from a mixture of heavy clay and straw found in arid regions. , APC (1) (American Power Conversion Corporation, West Kingston, RI, www.apcc.com) The leading manufacturer of UPS systems and surge suppressors, founded in 1981 by Rodger Dowdell, Neil Rasmussen and Emanual Landsman, three electronic power engineers who had worked at MIT. , Apple, Cisco, HP, IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) , Lenovo (Lenovo, Purchase, NY, www.lenovo.com) Asia's largest PC manufacturer, founded in China in 1984 by Liu Chuanzhi from the Chinese Academy of Sciences. In the late 1980s, the company, first known as Legend, introduced a circuit board that generated Chinese characters on Western-made PCs and , Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. , Sony SONY Standard Oil of New York (common, but untrue; it's an urban legend) , Symantec, Toshiba and ViewSonic. CDW was founded in 1984 and employs approximately 4,350 coworkers. In 2005, the company generated sales of $6.3 billion. CDW's direct model offers one-on-one relationships with knowledgeable account managers; purchasing by telephone, fax, the company's award-winning CDW.com web site, customized CDW@work(TM) extranets, CDWG CDWG Computer Discount Warehouse Government CDWG Collection Development Working Group CDWG Controls and Displays Working Group .com web site and macwarehouse.com web site; custom configured con·fig·ure tr.v. con·fig·ured, con·fig·ur·ing, con·fig·ures To design, arrange, set up, or shape with a view to specific applications or uses: solutions and same day shipping; and pre- pre- word element [L.], before (in time or space). pre- pref. 1. Earlier; before; prior to: prenatal. 2. and post-sales technical support, with approximately 120 factory-trained and A+ certified See certification. technicians on staff. A live web cast of CDW's management discussion of the first quarter of 2006 results will be available at www.cdw.com/investor. The web cast will begin today, April 25, 2006, at 8:30 a.m. ET / 7:30 a.m. CT. An audio replay of the call will also be available at www.cdw.com/investor for approximately two weeks. Additional financial and operational data is provided in a series of supplemental slides available at www.cdw.com/investor. For more information about CDW: Visit CDW on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at http://www.cdw.com. Contact CDW Investor Relations Investor relations The process by which the corporation communicates with its investors. via the Internet at investorrelations@cdw.com or by telephone at 847-419-6328. CDW is a registered trademark and CDW@work is a trademark of CDW Corporation. Other company and product names may be trademarks of their respective owners.
CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
Net sales $1,588,629 $1,475,082
Cost of sales 1,334,740 1,248,653
----------- -----------
Gross profit 253,889 226,429
Selling and administrative expenses 128,748 102,238
Net advertising expense 30,895 26,461
----------- -----------
Income from operations 94,246 97,730
Interest income 5,207 3,179
Other expense, net (962) (370)
----------- -----------
Income before income taxes 98,491 100,539
Income tax provision 36,813 39,142
----------- -----------
Net income $ 61,678 $ 61,397
=========== ===========
Earnings per share:
Basic $ 0.77 $ 0.74
=========== ===========
Diluted $ 0.75 $ 0.72
=========== ===========
Weighted-average number of
common shares outstanding:
Basic 80,004 82,621
=========== ===========
Diluted 81,973 85,309
=========== ===========
CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31, March 31,
2006 2005 2005
------------ ------------ ------------
Assets
Current assets:
Cash, cash equivalents and
marketable securities $ 541,019 $ 571,750 $ 590,247
Accounts receivable, net
of allowance for doubtful
accounts of $9,564, $9,564
and $9,887 respectively 659,914 637,245 571,052
Merchandise inventory 257,554 243,564 205,413
Miscellaneous receivables 53,550 27,848 27,214
Deferred income taxes 11,766 12,562 13,718
Prepaid expenses 15,669 8,274 5,660
------------ ------------ ------------
Total current assets 1,539,472 1,501,243 1,413,304
Marketable securities 65,463 39,176 86,142
Property and equipment, net 112,329 97,277 77,818
Other assets 11,730 11,360 10,715
------------ ------------ ------------
Total assets $ 1,728,994 $ 1,649,056 $ 1,587,979
============ ============ ============
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable $ 301,996 $ 245,201 $ 259,845
Accrued expenses and other
current liabilities 145,372 122,560 130,056
------------ ------------ ------------
Total current
liabilities 447,368 367,761 389,901
Long-term liabilities 24,999 16,730 11,779
Shareholders' equity:
Total shareholders'
equity 1,256,627 1,264,565 1,186,299
------------ ------------ ------------
Total
liabilities and
shareholders'
equity $ 1,728,994 $ 1,649,056 $ 1,587,979
============ ============ ============
Note: Certain prior period amounts have been reclassified to conform
with the current period's presentation.
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Three Months Ended March 31, 2006
---------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------ ------------
Net sales $ 1,150,184 $ 438,445 $ - $ 1,588,629
============ ============ ============ ============
Income (loss) from
operations $ 89,298 $ 14,703 $ (9,755) $ 94,246
============ ============ ============
Net interest
income and other
expense 4,245
------------
Income before
income taxes $ 98,491
============
Total assets $ 559,669 $ 242,193 $ 927,132 $ 1,728,994
============ ============ ============ ============
Three Months Ended March 31, 2005
---------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------ ------------
Net sales $ 1,088,301 $ 386,781 $ - $ 1,475,082
============ ============ ============ ============
Income (loss) from
operations $ 83,101 $ 22,610 $ (7,981) $ 97,730
============ ============ ============
Net interest
income and other
expense 2,809
------------
Income before
income taxes $ 100,539
============
Total assets $ 427,758 $ 249,281 $ 910,940 $ 1,587,979
============ ============ ============ ============
Note: Segment information for the three months ended March 31, 2005
has been restated to conform with the revised segment reporting
structure.
CDW CORPORATION AND SUBSIDIARIES
OPERATING DATA
----------------------------------------------------------------------
Three Months Ended March 31,
----------------------------
2006 2005
----------------------------
% of sales to commercial customers (1) 99.0% 98.5%
Direct web sales (000's) $500,967 $436,477
Sales force, end of period 2,128 1,985
Annualized inventory turnover 24 23
Accounts receivable - days sales
outstanding 37 35
----------------------------------------------------------------------
(1) Commercial customers are defined as public sector and corporate
customers excluding consumers.
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