CDW Achieves Record Fourth Quarter and Full Year 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. -- Fourth quarter 2005 highlights: --Average daily sales: $25.507 million, an increase of 8.3% year-over-year --Sales: $1.607 billion, an increase of 6.6% year-over-year --Net income: $70.5 million, an increase of 12.5% year-over-year --Diluted earnings per share: $0.86, an increase of 17.8% year-over-year Full year 2005 highlights: --Average daily sales: $24.674 million, an increase of 10.1% year-over-year --Sales: $6.3 billion, an increase of 9.7% year-over-year --Net income: $272 million, an increase of 12.7% year-over-year --Diluted earnings per share: $3.26, an increase of 16.8% year-over year 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) ) achieved its highest fourth quarter sales, net income and earnings per share and full year sales, net income and earnings per share in the company's history in 2005. Average daily sales in the fourth quarter of 2005 were $25.507 million compared to $23.549 million in the fourth quarter of 2004, representing an 8.3 percent increase. Total sales in the fourth quarter of 2005 sales were $1.607 billion, an increase of 6.6 percent versus the prior year quarter. The fourth quarter of 2005 had 63 billing days and the fourth quarter of 2004 had 64 billing days. Net income for the fourth quarter of 2005 was $70.5 million, an increase of 12.5 percent versus the fourth quarter of 2004. 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 were $0.86 in the fourth quarter of 2005, an increase of 17.8 percent compared to earnings per share of $0.73 in the fourth quarter of 2004. CDW also achieved record sales, net income, and earnings per share for full year 2005. Average daily sales for 2005 were $24.674 million compared to $22.413 million for 2004, representing a 10.1 percent increase. Total sales for 2005 were $6.3 billion, an increase of 9.7 percent versus the prior year. Full year 2005 had 255 billing days and full year 2004 had 256 billing days. Net income for 2005 was $272 million, an increase of 12.7 percent versus 2004. Diluted earnings per share were $3.26 in 2005, an increase of 16.8 percent compared to earnings per share of $2.79 in 2004. "We achieved record fourth quarter results by continuing to take market share, manage our business efficiently, and deliver profitable growth. Thanks to the continued dedication of our coworkers, 2005 was another year of record sales, net income, and earnings per share," said John A. Edwardson, chairman and chief executive officer. "In 2006, we expect to set new standards of service for our customers by leveraging our investments in the business and continuing to innovate in·no·vate v. in·no·vat·ed, in·no·vat·ing, in·no·vates v.tr. To begin or introduce (something new) for or as if for the first time. v.intr. To begin or introduce something new. . Our strategic objectives are solidly in place to build for the future, outpace out·pace tr.v. out·paced, out·pac·ing, out·pac·es To surpass or outdo (another), as in speed, growth, or performance. outpace Verb [-pacing, market growth, and continue our record of performance." Fourth Quarter Highlights: --Corporate sector average daily sales for the fourth quarter of 2005 were $17.925 million compared to $16.759 million, representing a 7.0 percent increase over last year. Total corporate sector sales in the fourth quarter of 2005 were $1.129 billion compared to $1.073 billion in the fourth quarter of 2004. --Public sector average daily sales for the fourth quarter of 2005 were $7.583 million compared to $6.790 million, representing an 11.7 percent increase over last year. Total public sector sales in the fourth quarter of 2005 were $478 million compared to $435 million in the fourth quarter of 2004. --Product categories that achieved the strongest year-over-year unit volume growth for the quarter on an average daily basis included software, data storage, printers, video, memory, and input devices. --Direct web sales were $455 million in the fourth quarter of 2005, representing a 16.9 percent increase compared to the same period a year ago, and comprised 28.3 percent of total sales. --December 2005 average daily sales were $26.703 million, compared to $24.840 million in December December: see month. 2004, representing a 7.5 percent increase. Total December 2005 sales were $561 million compared to $546 million in the prior period. December 2005 had 21 billing days and December 2004 had 22 billing days. Average daily sales increased for both the corporate and public sector segments in December 2005. 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 15.5 percent this quarter compared to 14.8 percent in the same period of 2004. The increase was primarily due to stronger product margins, increased net service contract revenue, and a larger amount of cooperative cooperative Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the advertising funds classified as a reduction of cost of sales. Marketing activities and related cooperative advertising increased in 2005 and virtually all cooperative advertising funds were reclassified 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 7.0 percent in the fourth quarter of 2005 compared to 6.5 percent in the fourth quarter of 2004. The increase in selling and administrative expenses in the fourth quarter of 2005 is primarily the result of increased payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. costs as the result of continued investment in expanding CDW's sales force and increased payroll costs for a larger number of coworkers to support a larger and growing business. The increase also included approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.3 million of start-up Start-up The earliest stage of a new business venture. costs related to the opening of the company's new 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]. , in December 2005. In addition, items associated with the previously announced modification A change or alteration in existing materials. Modification generally has the same meaning in the law as it does in common parlance. The term has special significance in the law of contracts and the law of sales. to the company's stock option program were reflected in selling and administrative expenses, including $1.3 million of expense for an additional 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 contribution for 2005 to the 401(k) plan of $1,000 per coworker co·work·er or co-work·er n. One who works with another; a fellow worker. and a $3.7 million charge in connection with the acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of 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: of options for coworkers through the manager level on December 31, 2005. The expense for these items was partially offset by a reduction of $5.3 million for an accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of a company-wide incentive bonus program based on a partial achievement of specific financial objectives for 2005. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 6.7 percent in both the fourth quarter of 2005 and 2004. The effective tax rate for the fourth quarter of 2005 was 36.3 percent compared to 39.5 percent for the fourth quarter of 2004. The tax rate of 36.3 percent for the fourth quarter of 2005 reflects an adjustment to the overall effective tax rate to arrive at a combined rate of 37.2 percent for full year 2005. --As previously announced, the company began collecting 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 result, CDW files state income tax returns in all 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 2005 compared to 2004. --The overall effective tax rate was 37.2 percent in 2005 compared to 39.6 percent in 2004. --The company currently expects the combined tax rate for 2006 to be 37.5 percent. CDW is required to review its effective tax rate estimate on a quarterly basis under accounting rules. During the fourth quarter of 2005, CDW repurchased 704,000 shares of common stock at an average price of $55.18 per share for an aggregate purchase price of approximately $39 million. Under the current share repurchase 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. 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 4.5 million shares, 2.2 million shares remain available for purchase. Full Year Highlights: --Full year 2005 average daily sales for the corporate sector were $17.297 million compared to $16.036 million, representing a 7.9 percent increase over last year. Total corporate sector sales in 2005 were $4.411 billion compared to $4.105 billion in 2004. --Full year 2005 average daily sales for the public sector were $7.377 million compared to $6.378 million, representing a 15.7 percent increase over last year. Total public sector sales in 2005 were $1.881 billion compared to $1.633 billion in 2004. --Direct web sales were $1.769 billion in the full year 2005, representing a 15.9 percent increase compared to the same period a year ago, and comprised 28 percent of total sales. Gross profit margin was 15.4 percent in 2005 compared to 15.2 percent in 2004, primarily due to a larger amount of cooperative advertising funds classified as a reduction of cost of sales. Selling and administrative expenses as a percentage of sales were 6.9 percent in 2005 compared to 6.7 percent in 2004. The increase in selling and administrative expenses in 2005 is primarily the result of continued investment in expanding CDW's sales force and increased payroll costs for a larger number of coworkers to support a larger and growing business. The increase also included approximately $2.7 million of start-up costs related to the opening of the company's new distribution center in North Las Vegas, Nevada, in December 2005. In addition, items associated with the previously announced modification to the company's stock option program were also reflected in selling and administrative expenses, including $4.0 million of expense for an additional profit-sharing contribution for 2005 to the 401(k) plan of $1,000 per coworker and a $3.7 million charge in connection with the acceleration of vesting of options for coworkers through the manager level on December 31, 2005. The expense for these items was partially offset by a reduction of $5.3 million for an accrual of a company-wide incentive bonus program based on a partial achievement of specific financial objectives. Total share repurchases for 2005 were approximately 4.6 million at an average price of $56.52 per share for an aggregate purchase price of approximately $258 million. Including an annual cash dividend of approximately $35 million, total dollars returned to shareholders in 2005 were approximately $293 million. The company plans to release January January: see month. sales on Thursday Thursday: see week. , February February: see month. 9, 2006. January 2005 had 21 billing days and January 2006 will have 21 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 Incorrect means to not be correct and may also refer to:
About CDW CDW(R), ranked No. 347 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 (Symantec Corporation, Cupertino, CA, www.symantec.com) A software company founded in 1982 by Dr. Gary Hendrix. It was acquired by Gordon Eubanks in 1984 and released its Q&A file manager the following year. In 1990, it merged with Peter Norton Computing, Inc. , Toshiba Toshiba Corporation (株式会社東芝 Kabushiki-gaisha Tōshiba and ViewSonic ViewSonic is a manufacturer and provider of visual technology, specifically CRT monitors, liquid crystal displays, projectors, plasma displays, HDTV technology, and mobile products, including tablet PCs and wireless monitors. . CDW was founded in 1984 and employs approximately 4,300 coworkers. In 2005, the company generated sales of $6.3 billion. CDW's direct model offers one-on-one one-on-one adj. 1. Consisting of or being direct communication or exchange between two people: one-on-one instruction. 2. Sports Playing directly or exclusively against a single opponent. relationships with knowledgeable account managers; purchasing by telephone, fax, the company's award-winning Adj. 1. award-winning - having received awards; "this award-winning bridge spans a distance of five miles" 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 fourth quarter of 2005 results will be available at www.cdw.com/investor. The web cast will begin today, January 24, 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 CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net sales $1,606,964 $1,507,127 $6,291,845 $5,737,774
Cost of sales 1,358,184 1,283,952 5,324,215 4,867,650
----------- ----------- ----------- -----------
Gross profit 248,780 223,175 967,630 870,124
Selling and
administrative
expenses 113,249 98,514 433,482 386,563
Net advertising expense 28,545 23,293 114,514 90,802
----------- ----------- ----------- -----------
Income from operations 106,986 101,368 419,634 392,759
Interest income 4,325 2,722 15,155 8,968
Other expense, net (698) (408) (1,831) (1,867)
----------- ----------- ----------- -----------
Income before income
taxes 110,613 103,682 432,958 399,860
Income tax provision 40,103 40,983 160,866 158,415
----------- ----------- ----------- -----------
Net income $ 70,510 $ 62,699 $ 272,092 $ 241,445
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.88 $ 0.75 $ 3.35 $ 2.90
=========== =========== =========== ===========
Diluted $ 0.86 $ 0.73 $ 3.26 $ 2.79
=========== =========== =========== ===========
Weighted-average number
of common shares
outstanding:
Basic 80,064 83,168 81,128 83,391
=========== =========== =========== ===========
Diluted 82,316 86,184 83,566 86,552
=========== =========== =========== ===========
Dividends per share $ 0.00 $ 0.00 $ 0.43 $ 0.36
=========== =========== =========== ===========
CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2005 2004
------------ ------------
Assets
Current assets:
Cash, cash equivalents and marketable
securities $ 571,750 $ 478,197
Accounts receivable, net of allowance
for doubtful accounts of $9,564 and
$9,890 respectively 637,245 580,035
Merchandise inventory 243,564 213,222
Miscellaneous receivables 27,848 24,364
Deferred income taxes 12,562 13,718
Prepaid expenses 8,274 6,901
------------ ------------
Total current assets 1,501,243 1,316,437
Marketable securities 39,176 125,426
Property and equipment, net 97,277 68,595
Other assets 11,360 10,477
------------ ------------
Total assets $ 1,649,056 $ 1,520,935
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 245,201 $ 167,877
Accrued expenses and other current
liabilities 122,560 102,987
------------ ------------
Total current liabilities 367,761 270,864
Long-term liabilities 16,730 8,654
Shareholders' equity:
Total shareholders' equity 1,264,565 1,241,417
------------ ------------
Total liabilities and
shareholders' equity $ 1,649,056 $ 1,520,935
============ ============
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 December 31, 2005
---------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------ ------------
Net sales $ 1,129,266 $ 477,698 $ - $ 1,606,964
============ ============ ============ ============
Income (loss) from
operations $ 88,669 $ 26,304 $ (7,987) $ 106,986
============ ============ ============
Net interest income
and other expense 3,627
------------
Income before
income taxes $ 110,613
============
Total assets $ 442,691 $ 285,709 $ 920,656 $ 1,649,056
============ ============ ============ ============
Three Months Ended December 31, 2004
---------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------ ------------
Net sales $ 1,072,575 $ 434,552 $ - $ 1,507,127
============ ============ ============ ============
Income (loss) from
operations $ 84,437 $ 23,600 $ (6,669) $ 101,368
============ ============ ============
Net interest income
and other expense 2,314
------------
Income before
income taxes $ 103,682
============
Total assets $ 411,381 $ 237,686 $ 871,868 $ 1,520,935
============ ============ ============ ============
Note: Segment information for the three months ended December 31, 2004
has been restated to conform with the revised segment reporting
structure.
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Year Ended December 31, 2005
---------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------ ------------
Net sales $ 4,410,708 $ 1,881,137 $ - $ 6,291,845
============ ============ ============ ============
Income (loss) from
operations $ 341,810 $ 110,425 $ (32,601) $ 419,634
============ ============ ============
Net interest income
and other expense 13,324
------------
Income before
income taxes $ 432,958
============
Total assets $ 442,691 $ 285,709 $ 920,656 $ 1,649,056
============ ============ ============ ============
Year Ended December 31, 2004
---------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------ ------------
Net sales $ 4,105,090 $ 1,632,684 $ - $ 5,737,774
============ ============ ============ ============
Income (loss) from
operations $ 327,520 $ 93,411 $ (28,172) $ 392,759
============ ============ ============
Net interest income
and other expense 7,101
------------
Income before
income taxes $ 399,860
============
Total assets $ 411,381 $ 237,686 $ 871,868 $ 1,520,935
============ ============ ============ ============
Note: Segment information for the year ended December 31, 2004 has
been restated to conform with the revised segment reporting structure.
CDW CORPORATION AND SUBSIDIARIES
OPERATING DATA
Three Months Ended Years Ended
December 31, December 31,
----------------------------------------------
2005 2004 2005 2004
----------------------------------------------
% of sales to commercial
customers (1) 99.0% 98.4% 98.9% 98.1%
Direct web sales (000's) $454,643 $388,753 $1,769,032 $1,525,712
Sales force, end of
period 2,153 2,012 2,153 2,012
Annualized inventory
turnover 25 24 24 24
Accounts receivable -
days sales outstanding 36 35 37 37
----------------------------------------------------------------------
(1) Commercial customers are defined as public sector and corporate
customers excluding consumers.
SELLING DAYS (1)
Month 2006 2005
------------------------------------------------------------
January 21 21
February 20 20
March 23 23
------------------------------------------------------------
Quarter 1 Total 64 64
------------------------------------------------------------
April 20 21
May 22 21
June 22 22
------------------------------------------------------------
Quarter 2 Total 64 64
------------------------------------------------------------
July 20 20
August 23 23
September 20 21
------------------------------------------------------------
Quarter 3 Total 63 64
------------------------------------------------------------
October 22 21
November 21 21
December 20 21
------------------------------------------------------------
Quarter 4 Total 63 63
------------------------------------------------------------
Fiscal Year 254 255
------------------------------------------------------------
(1) The number of selling days by month and quarter for both 2006 and
2005 are being provided for reference.
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