CDW Reports Full Year and Fourth Quarter Results.Company Achieves Record Annual Sales and Earnings per Share 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) ): Full year 2006 highlights: * Sales: $6.785 billion, up 7.8% year-over-year * Average daily sales: $26.714 million, up 8.3% year-over-year * Gross profit: $1.070 billion, up 10.6% year-over-year * 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 : $3.30, up 1.2% year-over-year (includes litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement) * Non-GAAP diluted earnings per share: $3.49, up 7.1% year-over-year Fourth quarter of 2006 highlights: * Sales: $1.824 billion, up 13.5% year-over-year * Average daily sales: $28.951 million, up 13.5% year-over-year * Gross profit: $284.0 million, up 14.2% year-over-year * Diluted earnings per share: $0.67, down 22.1% year-over-year (includes litigation settlement) * Non-GAAP diluted earnings per share: $0.86, flat year-over-year CDW Corporation (NASDAQ: CDWC) a leading provider of technology products and services to business, government and education, today announced record quarterly sales and gross profit in the fourth quarter of 2006 and record annual sales, gross profit and diluted earnings per share in 2006. "In 2006, we expanded our platform for growth, which resulted in a challenging and productive year for us. As we drove to implement change across several areas of our business, we still delivered record sales and diluted earnings per share," said John A. Edwardson, chairman and chief executive officer. "Key accomplishments for the year included the geographic alignment of medium and large customer accounts in the corporate sector, the acquisition of Berbee Berbee Information Networks Corporation, until its purchase by CDW, was a privately-held company. Berbee was founded in 1993 by James G. Berbee and it grew to over 300 million USD in revenue and more than 800 employees at the time of its sale in October, 2006. Information Networks, double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. sales growth in our public sector segment and investment in our infrastructure to increase capacity for future growth. As we enter 2007, we will focus on leveraging our enhanced infrastructure and increasing our ability to profitably 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." "Central to our growth strategy is continuing to improve our unmatched service to customers. We are very pleased with the addition of Berbee, which has significantly increased our ability to offer customers a single source for their core technology needs and more advanced IT services and solutions. We are excited about the opportunity to scale Berbee's business processes to generate additional growth," said Edwardson. Fourth Quarter of 2006: Total sales in the fourth quarter of 2006 were $1.824 billion compared to $1.607 billion in the fourth quarter of 2005, an increase of 13.5 percent. Average daily sales in the fourth quarter of 2006 were $28.951 million compared to $25.507 million in the fourth quarter of 2005, representing a 13.5 percent increase. There were 63 billing days in both the fourth quarter of 2006 and the fourth quarter of 2005. As previously announced, CDW completed the acquisition of Berbee Information Networks Corporation on October October: see month. 11, 2006. Total sales for the fourth quarter of 2005 do not include Berbee sales, while the fourth quarter of 2006 sales include Berbee sales from the date of the acquisition through the end of the year. Excluding Berbee sales in the fourth quarter of 2006, and therefore on a non-GAAP basis, total sales were $1.715 billion, an increase of 6.7 percent compared to total sales of $1.607 billion for the fourth quarter of 2005. Excluding Berbee sales in the fourth quarter of 2006, and therefore on a non-GAAP basis, CDW's average daily sales for the fourth quarter of 2006 were $27.221 million, an increase of 6.7 percent compared to average daily sales for the fourth quarter of 2005 of $25.507 million. * Total corporate sector segment sales in the fourth quarter of 2006 were $1.164 billion compared to $1.129 billion in the fourth quarter of 2005, representing an increase of 3.0 percent. Fourth quarter of 2006 average daily sales for the corporate sector segment were $18.471 million compared to $17.925 million in the fourth quarter of 2005, representing an increase of 3.0 percent. * Total public sector segment sales in the fourth quarter of 2006 were $551.3 million compared to $477.7 million in the fourth quarter of 2005, representing an increase of 15.4 percent. Fourth quarter of 2006 average daily sales for the public sector segment were $8.750 million compared to $7.583 million in the fourth quarter of 2005, representing an increase of 15.4 percent. * Product categories that achieved the strongest year-over-year unit volume growth for the fourth quarter of 2006 excluding Berbee were notebook computers A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. , data storage, software, video, memory and input devices. * Direct web sales in the fourth quarter of 2006 were $491.2 million, representing an 8.0 percent increase compared to the prior year, and comprised 28.6 percent of total sales excluding Berbee and therefore on a non-GAAP basis. Berbee's sales are not made on the web due to the higher services component of the sales. * Total sales in December December: see month. 2006 were $619.6 million compared to $560.8 million in December 2005, representing a 10.5 percent increase. Average daily sales in December 2006 were $30.982 million compared to $26.703 million in the prior year period, representing a 16.0 percent increase. December 2006 had 20 billing days and December 2005 had 21 billing days. * Total sales for December 2005 do not include Berbee sales, while December 2006 sales include Berbee sales. Excluding Berbee sales in December 2006, and therefore on a non-GAAP basis, total sales in December 2006 were $570.7 million compared to $560.8 million in December 2005, representing a 1.8 percent increase. Excluding Berbee sales in December 2006, and therefore on a non-GAAP basis, average daily sales in December 2006 were $28.534 million compared to $26.703 million in the prior year period, representing a 6.9 percent increase. * In December 2006, average daily sales for the public sector segment increased 12.4 percent and average daily sales for the corporate sector segment increased 4.6 percent compared to the prior year period. Gross profit for the fourth quarter of 2006 was $284.0 million compared to $248.8 million in the fourth quarter of 2005, and increased $35.3 million. 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 15.6 percent in the fourth quarter of 2006 compared to 15.5 percent in the same period of 2005. The increase was primarily due to the inclusion of Berbee from the date of acquisition through the end of the year, partially offset by lower product margin. Selling and administrative expenses as a percentage of sales were 8.1 percent in the fourth quarter of 2006 compared to 7.0 percent in the fourth quarter of 2005, and increased $34.5 million. The increase in selling and administrative expenses in the fourth quarter of 2006 was primarily due to: * The inclusion of Berbee's operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. from the date of acquisition through the end of the year increased operating expenses by $18.5 million. * Incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. of $2.9 million associated with the operations 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]. , and additional leased office space 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 $3.8 million due to 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, as previously announced. * Increased payroll and benefits costs as a result of continued investment in expanding CDW's sales force and additional coworkers to support a larger and growing business. * Items included in the fourth quarter of 2005 that were previously announced and did not repeat in the fourth quarter of 2006 were a reversal 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 and a $3.7 million charge in connection with the acceleration 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. In the fourth quarter of 2006, CDW recorded a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. expense of $25.0 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta ($15.4 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ), in connection with the negotiated settlement of the previously disclosed litigation involving the Company's 2003 purchase of selected assets of Micro Warehouse ("litigation settlement"). The litigation settlement is subject to execution of a definitive agreement and court approval. See supplemental table at the end of the press release for GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). to non-GAAP financial measures. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 4.5 percent in the fourth quarter of 2006 compared to 6.7 percent in the fourth quarter of 2005. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $82.8 million in the fourth quarter of 2006 compared to $107.0 million in the fourth quarter of 2005. Operating income for the fourth quarter of 2006 included the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax). Non-GAAP operating margin based on non-GAAP operating income of $107.8 million, which excludes the litigation settlement, was 5.9 percent in the fourth quarter of 2006 compared to 6.7 percent in the fourth quarter of 2005. The non-GAAP operating margin information is being presented to provide meaningful comparisons to prior periods. Interest income was $3.9 million for the fourth quarter of 2006, a decrease of $0.4 million compared to the same period of 2005. The decrease was a result of lower cash and investment balances due to the purchase of Berbee. The effective tax rate for the fourth quarter of 2006 was 38.0 percent compared to 36.3 percent for the fourth quarter of 2005. The difference was primarily due to the inclusion of Berbee in the calculation of the tax provision in the fourth quarter of 2006. Net income was $53.6 million in the fourth quarter of 2006 compared to $70.5 million in the fourth quarter of 2005, a decrease of $17.0 million. Net income in the fourth quarter of 2006 included the impact of SFAS 123R, the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax) and an increase in the effective tax rate. Non-GAAP net income, which excludes the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax), was $69.0 million in the fourth quarter of 2006 compared to $70.5 million in the fourth quarter of 2005, a decrease of $1.6 million. The non-GAAP net income information is being presented to provide meaningful comparisons to prior periods. Diluted earnings per share were $0.67 in the fourth quarter of 2006 compared to diluted earnings per share of $0.86 in the fourth quarter of 2005. Results for the fourth quarter of 2006 included stock-based compensation expense of $3.8 million pre-tax ($2.4 million after-tax) due to the implementation of SFAS 123R or approximately $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, the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax) or approximately $0.19 per diluted share and approximately $0.02 per diluted share from a higher effective tax rate. Non-GAAP diluted earnings per share based on non-GAAP net income of $69.0 million, which excludes the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax), were $0.86 in the fourth quarter of 2006 compared to $0.86 in the fourth quarter of 2005. The non-GAAP diluted earnings per share information is being presented to provide meaningful comparisons to prior periods. During the fourth quarter of 2006, CDW did not 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. shares of common stock. Full Year 2006: Total sales for 2006 were $6.785 billion compared to $6.292 billion in 2005, an increase of 7.8 percent. Average daily sales for 2006 were $26.714 million compared to $24.674 million in 2005, representing an 8.3 percent increase. There were 254 billing days in 2006 and 255 billing days in 2005. Total sales for 2005 do not include Berbee sales, while 2006 sales include Berbee sales from the date of acquisition through the end of the year. Excluding Berbee sales in 2006, and therefore on a non-GAAP basis, total sales were $6.676 billion, an increase of 6.1 percent compared to total sales of $6.292 billion for 2005. Excluding Berbee sales in 2006, and therefore on a non-GAAP basis, CDW's average daily sales for 2006 were $26.285 million, an increase of 6.5 percent compared to average daily sales for 2005 of $24.674 million. * Total corporate sector segment sales in 2006 were $4.514 billion compared to $4.411 billion in 2005, representing an increase of 2.3 percent. Average daily sales for the corporate sector segment in 2006 were $17.772 million compared to $17.297 million in 2005, representing an increase of 2.7 percent. * Total public sector segment sales in 2006 were $2.162 billion compared to $1.881 billion in 2005, representing an increase of 15.0 percent. Average daily sales for the public sector segment in 2006 were $8.513 million compared to $7.377 million in 2005, representing an increase of 15.4 percent. * Product categories that achieved the strongest year-over-year unit volume growth in 2006 excluding Berbee were notebook computers, software, video, memory and input devices. * Direct web sales in 2006 were $1.982 billion, representing a 12.0 percent increase compared to the prior year, and comprised 29.7 percent of total sales excluding Berbee and therefore on a non-GAAP basis. Gross profit for 2006 was $1.070 billion compared to $967.6 million in 2005, and increased $102.2 million. Gross profit margin was 15.8 percent in 2006 compared to 15.4 percent in 2005. The increase was primarily due to increased product margin, net service contract revenue and commission revenue and a higher level of vendor incentives. Selling and administrative expenses as a percentage of sales were 7.8 percent in 2006 compared to 6.9 percent in 2005, and increased $96.6 million. The increase in selling and administrative expenses in 2006 was primarily due to: * The inclusion of Berbee's operating expenses from the date of acquisition through the end of the year increased operating expenses by $18.5 million. * Incremental costs of $19.3 million associated with the operations of the company's new distribution center in North Las Vegas, Nevada, and additional leased office space in Chicago and Vernon Hills, Illinois. As previously announced, these infrastructure investments are being made to position the company for future growth. * Stock-based compensation expense of $15.8 million due to the required implementation of SFAS 123R, as previously announced. * Increased sales commission expense due to the achievement of a stronger gross profit margin compared to the prior year . * Increased payroll and benefits costs as a result of continued investment in expanding CDW's sales force and additional coworkers to support a larger and growing business. Operating margin was 5.8 percent in 2006 compared to 6.7 percent in 2005. Operating income was $396.4 million in 2006 compared to $419.6 million in 2005. Operating income in 2006 included the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax). Non-GAAP operating margin based on non-GAAP operating income of $421.4 million, which excludes the litigation settlement, was 6.2 percent in 2006 compared to 6.7 percent in 2005. The non-GAAP operating margin information is being presented to provide meaningful comparisons to prior periods. Interest income was $19.8 million for 2006, an increase of $4.6 million compared to 2005. The increase was primarily due to higher interest rates. The effective tax rate for 2006 was 35.8 percent compared to 37.2 percent for 2005. The year-over-year decrease in the effective tax rate is primarily due to the previously announced reduction of tax for reserves for prior years as a result of the resolution of a tax audit or expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of the statute of limitations A type of federal or state law that restricts the time within which legal proceedings may be brought. Statutes of limitations, which date back to early Roman Law, are a fundamental part of European and U.S. law. for the audit of a tax year. Net income was $266.1 million in 2006 compared to $272.1 million in 2005, a decrease of $6.0 million. Net income in 2006 included the impact of SFAS 123R, the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax) and a reduction in the effective tax rate. Non-GAAP net income, which excludes the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax), was $281.5 million in 2006 compared to $272.1 million in 2005, an increase of $9.4 million. The non-GAAP net income information is being presented to provide meaningful comparisons to prior periods. Diluted earnings per share were $3.30 in 2006 compared to diluted earnings per share of $3.26 in 2005. Results for 2006 included stock-based compensation expense of $15.8 million pre-tax ($10.1 million after-tax) due to the implementation of SFAS 123R or approximately $0.13 per diluted share, the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax) or approximately $0.19 per diluted share, and approximately $0.07 per diluted share from a lower effective tax rate. Non-GAAP diluted earnings per share based on non-GAAP net income of $281.5 million, which excludes the litigation settlement of $25.0 million pre-tax ($15.4 million after-tax), were $3.49 in 2006 compared to $3.26 in 2005. The non-GAAP diluted earnings per share information is being presented to provide meaningful comparisons to prior periods. During 2006, CDW repurchased 4.059 million shares of common stock at an average price of approximately $56.09 per share for an aggregate purchase price of $228 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 2006 for the repurchase of 5.0 million shares, approximately 3.2 million shares remain available for purchase. CDW returned a total of $269 million to shareholders in 2006 comprised of $228 million of share repurchases and an annual cash dividend of $41 million. The company plans to release January sales on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February February: see month. 9, 2007. January 2006 had 21 billing days and January 2007 will have 22 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 Acer Acer trees of the family Aceraceae. Acer rubrum ingestion of wilted or dries leaves of this tree causes acute hemolytic anemia characterized by red urine, jaundice, anemia and methemoglobinemia in horses. , 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. , Apple, Cisco, Fujitsu (company) Fujitsu - A Japanese elecronics corporation. Fujitsu owns ICL, Amdahl Corporation, and DMR. Home USA, Japan. , 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. , Panasonic, Quantum, Samsung, Sony, Symantec and ViewSonic. CDW's direct model offers customers one-on-one relationships with knowledgeable account managers and access to more than 760 on-staff engineers and advanced technology specialists who customize solutions for customers' complex technology needs. CDW also provides same-day product shipping and post-sales technical support. CDW was founded in 1984 and employs approximately 5,480 coworkers. In 2006, the company generated sales of $6.8 billion. For more information, visit CDW.com. A live web cast of CDW's management discussion of the fourth quarter of 2006 results will be available at www.cdw.com/investor. The web cast will begin today, January 26, 2007, 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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