CDW Reports Second Quarter Results; Company Achieves Record Quarterly 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) ): --Sales: $1.633 billion, up 6.1% year-over-year --Average daily sales: $25.523 million, up 6.1% year-over-year --Gross profit: $264.0 million, up 11.2% year-over-year --Net income: $73.1 million, up 9.0% year-over-year --Diluted earnings per share: $0.91, up 13.8% year-over-year CDW Corporation (NASDAQ:CDWC) achieved record quarterly 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 second quarter of 2006. Total sales in the second quarter of 2006 were $1.633 billion compared to $1.540 billion in the second quarter of 2005, an increase of 6.1 percent. Average daily sales in the second quarter of 2006 were $25.523 million compared to $24.056 million in the second quarter of 2005, representing a 6.1 percent increase. The second quarter of 2006 and the second quarter of 2005 both had 64 billing days. Gross profit for the second quarter of 2006 was $264.0 million compared to $237.5 million in the second quarter of 2005, an increase of 11.2 percent. Net income increased 9.0 percent for the second quarter of 2006 to $73.1 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 $0.91 in the second quarter of 2006, an increase of 13.8 percent compared to diluted earnings per share of $0.80 in the second quarter of 2005. The second quarter of 2006 included stock-based compensation expense of $2.4 million after tax ($3.7 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. "Our commitment to serving our customers is the foundation of our financial performance. In addition to our consistent emphasis on customer service, our disciplined focus on profitable growth, operational efficiency, and returning capital 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. resulted in a strong quarter characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by improved 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. and record earnings per share," said John A. Edwardson, chairman and chief executive officer. "This performance was due to the efforts of all of our coworkers, who execute our growth strategies every day and deliver the best customer service in the industry." "While we continued to profitably take market share, we remain committed to growing revenue at a faster pace. To do that, we have taken steps to create a more strategic platform for future growth. Based on our successful customer segmentation strategy in the public sector, we segmented the majority of our medium and large corporate customers into geographic territories, and realigned our medium and large corporate sector account managers accordingly. This has been a significant undertaking over the past several months. Medium and large corporate sector account managers involved with the change are in process of building relationships with customers whose accounts have been transferred. We believe 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. affected corporate sector sales growth in the second quarter of 2006, but we also know this is the right strategy for growth. We now have a consistent framework for those sales teams that use geographic segmentation, which is designed to enhance our ability to serve customers, drive new business, increase sales teams' ownership and accountability The traceability of actions performed on a system to a specific system entity (user, process, device). For example, the use of unique user identification and authentication supports accountability; the use of shared user IDs and passwords destroys accountability. , and maximize account coverage," Edwardson said. Second Quarter Highlights: --Total corporate sector segment sales in the second quarter of 2006 were $1.112 billion compared to $1.076 billion in the second quarter of 2005, representing a 3.3 percent increase. Second quarter of 2006 average daily sales for the corporate sector segment were $17.373 million compared to $16.820 million in the second quarter of 2005. --Total public sector segment sales in the second quarter of 2006 were $521.6 million compared to $463.1 million in the second quarter of 2005, representing a 12.6 percent increase. Second quarter of 2006 average daily sales for the public sector segment were $8.150 million compared to $7.236 million in the second 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 second quarter of 2006 were $493.5 million, representing a 16.8 percent increase compared to the same period a year ago, and comprised 30.2 percent of total sales. --June 2006 sales were $600.4 million compared to $567.4 million in June June: see month. 2005, representing a 5.8 percent increase. June 2006 average daily sales were $27.293 million compared to $25.793 million in the prior period. June 2006 and June 2005 both had 22 billing days. In June 2006, corporate sector segment sales increased 3.8 percent and public sector segment sales increased 9.8 percent. 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 16.2 percent in the second quarter of 2006 compared to 15.4 percent in the same period of 2005. The increase was primarily due to increased net service contract and commission revenue, a higher level of vendor incentives, and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. comparison of delivery charges due to more limited delivery promotions. Selling and administrative expenses as a percentage of sales were 7.7 percent in the second quarter of 2006 compared to 6.8 percent in the second quarter of 2005. The increase in selling and administrative expenses in the second quarter of 2006 was primarily due to: --Costs of $6.3 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 $3.7 million due to the required implementation of SFAS 123R on January 1, 2006, as previously announced. --Increased payroll costs as a result of continued investment in expanding CDW's sales force and additional 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 6.6 percent in the second quarter of 2006 compared to 6.7 percent in the second quarter of 2005. Interest income was $5.5 million for the second quarter of 2006, an increase of $1.5 million compared to the same period of 2005 due to higher interest rates. The effective tax rate for the second quarter of 2006 was 35.4 percent compared to 36.7 percent for the second quarter of 2005. Share Repurchase Activity During the second quarter of 2006, CDW repurchased 1.5 million shares of common stock at an average price of $54.51 per share for an aggregate purchase price of $84 million. Under the current share repurchase program approved in April 2006 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 5.0 million shares, 3.5 million shares remain available for purchase. In addition, the Company paid an annual cash dividend of $0.52 per share to common stock shareholders on June 30, 2006, for a total amount of $41 million. Including share repurchases of $128 million in the first quarter of 2006, total dollars returned to shareholders in the first six months of 2006 were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $253 million. The company plans to release July July: see month. sales on Thursday Thursday: see week. , August 10, 2006. July 2005 had 20 billing days and July 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 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, 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
CDW was founded in 1984 and employs approximately 4,450 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 second quarter of 2006 results will be available at www.cdw.com/investor. The web cast will begin today, July 19, 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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $1,633,458 $1,539,595 $3,222,087 $3,014,677
Cost of sales 1,369,421 1,302,117 2,704,161 2,550,770
----------- ----------- ----------- -----------
Gross profit 264,037 237,478 517,926 463,907
Selling and
administrative
expenses 126,192 105,325 254,940 207,563
Advertising expense 30,007 29,665 60,902 56,126
----------- ----------- ----------- -----------
Income from operations 107,838 102,488 202,084 200,218
Interest income 5,492 3,989 10,699 7,168
Other expense, net (94) (479) (1,056) (849)
----------- ----------- ----------- -----------
Income before income
taxes 113,236 105,998 211,727 206,537
Income tax provision 40,125 38,937 76,938 78,079
----------- ----------- ----------- -----------
Net income $73,111 $67,061 $134,789 $128,458
=========== =========== =========== ===========
Earnings per share:
Basic $0.93 $0.82 $1.70 $1.57
=========== =========== =========== ===========
Diluted $0.91 $0.80 $1.66 $1.52
=========== =========== =========== ===========
Weighted-average
number of
common shares
outstanding:
Basic 78,994 81,337 79,488 81,975
=========== =========== =========== ===========
Diluted 80,564 83,737 81,268 84,521
=========== =========== =========== ===========
Dividends per share $0.52 $0.43 $0.52 $0.43
=========== =========== =========== ===========
CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31, June 30,
2006 2005 2005
----------- ------------ -----------
Assets
Current assets:
Cash, cash equivalents and
marketable securities $444,925 $571,750 $510,006
Accounts receivable, net of
allowance for doubtful
accounts of $9,574, $9,564
and $9,879 respectively 689,824 637,245 628,906
Merchandise inventory 257,035 243,564 214,931
Miscellaneous receivables 50,953 27,848 28,829
Deferred income taxes 14,674 12,562 13,718
Prepaid expenses 12,072 8,274 4,632
----------- ------------ -----------
Total current assets 1,469,483 1,501,243 1,401,022
Marketable securities 59,261 39,176 70,364
Property and equipment, net 115,780 97,277 81,368
Other assets 11,187 11,360 10,626
----------- ------------ -----------
Total assets $1,655,711 $1,649,056 $1,563,380
=========== ============ ===========
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable $277,317 $245,201 $281,170
Accrued expenses and other
current liabilities 134,764 122,560 117,442
----------- ------------ -----------
Total current
liabilities 412,081 367,761 398,612
Long-term liabilities 22,138 16,730 15,597
Shareholders' equity:
Total shareholders'
equity 1,221,492 1,264,565 1,149,171
----------- ------------ -----------
Total liabilities
and shareholders'
equity $1,655,711 $1,649,056 $1,563,380
=========== ============ ===========
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Three Months Ended June 30, 2006
----------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------- ------------
Net sales $1,111,879 $521,579 $- $1,633,458
============ ============ ============= ============
Income (loss) from
operations $88,896 $28,950 $(10,008) $107,838
============ ============ =============
Net interest
income and other
expense 5,398
------------
Income before
income taxes $113,236
============
Total assets $596,065 $250,747 $808,899 $1,655,711
============ ============ ============= ============
Three Months Ended June 30, 2005
----------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------- ------------
Net sales $1,076,483 $463,112 $- $1,539,595
============ ============ ============= ============
Income (loss) from
operations $81,458 $29,097 $(8,067) $102,488
============ ============ =============
Net interest
income and other
expense 3,510
------------
Income before
income taxes $105,998
============
Total assets $434,453 $265,373 $863,554 $1,563,380
============ ============ ============= ============
Note: Segment information for the three months ended June 30, 2005 has
been restated to conform with the revised segment reporting structure.
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Six Months Ended June 30, 2006
----------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------- ------------
Net sales $2,262,063 $960,024 $- $3,222,087
============ ============ ============= ============
Income (loss) from
operations $178,194 $43,653 $(19,763) $202,084
============ ============ =============
Net interest
income and other
expense 9,643
------------
Income before
income taxes $211,727
============
Total assets $596,065 $250,747 $808,899 $1,655,711
============ ============ ============= ============
Six Months Ended June 30, 2005
----------------------------------------------------
Corporate Public Headquarters/
Sector Sector Other Consolidated
------------ ------------ ------------- ------------
Net sales $2,164,784 $849,893 $- $3,014,677
============ ============ ============= ============
Income (loss) from
operations $164,559 $51,707 $(16,048) $200,218
============ ============ =============
Net interest
income and other
expense 6,319
------------
Income before
income taxes $206,537
============
Total assets $434,453 $265,373 $863,554 $1,563,380
============ ============ ============= ============
Note: Segment information for the six months ended June 30, 2005 has
been restated to conform with the revised segment reporting structure.
CDW CORPORATION AND SUBSIDIARIES
OPERATING DATA
----------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------
2006 2005 2006 2005
----------------------------------------
% of sales to commercial
customers (1) 99.1% 98.8% 99.0% 98.7%
Direct web sales (000's) $493,522 $422,614 $994,489 $859,091
Sales force, end of period 2,179 1,962 2,179 1,962
Annualized inventory turnover 23 25 23 24
Accounts receivable - days
sales outstanding 38 37 39 38
----------------------------------------------------------------------
(1) Commercial customers are defined as public sector and corporate
customers excluding consumers.
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