First Quarter 1997
Earnings Release
April 17, 1997
CDW COMPUTER CENTERS, INC.
REPORTS RECORD SALES AND EARNINGS
First Quarter Highlights:
- 44% growth in net sales
- Pro forma operating income increases by 63%
- Orders processed increase 48%
- Fifteenth consecutive quarter of sequential sales growth as a public company
| Financial & Operating Data* |
Quarter Ended |
% |
|
Reflects 3-for-2 stock split paid July 15, 1996 |
3/31/97 |
3/31/96 |
Change |
| Net Sales (000’s) |
$297,777 |
$206,705 |
44% |
| Income from Operations (000’s) |
$17,916 |
$8,291 |
116% |
| Net Income (000’s) |
$11,359 |
$5,534 |
105% |
| Net Income Per Share |
$0.52 |
$0.26 |
100% |
| O/S Shares |
21,682 |
21,648 |
0% |
Pro forma - Excluding Exit Charge and Related Impact |
| Income from Operations (000’s) |
$18,716 |
$11,491 |
63% |
| Net Income (000’s) |
$11,842 |
$7,486 |
58% |
| Net Income Per Share |
$0.55 |
$0.35 |
57% |
Operating Data
|
| Number of Orders Shipped (000's) |
445 |
300 |
48% |
| Average Order Size |
$669 |
$689 |
(3)% |
| Catalogs Mailed (000's) |
19,983 |
12,907 |
55% |
| Customers Serviced (000's) |
200 |
147 |
36% |
| Pages of National Advertising Placed |
212 |
150 |
41% |
"We increased sales and, we believe, market share in the first quarter by reaching more customers and shipping more orders. The records in sales and earnings are a result of our proven strategies of discounted prices with outstanding customer service, all within a cost efficient operating structure. We are excited about the move to our new facility which will provide the physical capacity for future growth. We will strive to minimize any disruption to customer service during the move which is currently scheduled for the beginning of the third quarter."
--- Michael P. Krasny, Chairman and Chief Executive Officer |
Buffalo Grove, Illinois, April 17, 1997 --- CDW Computer Centers, Inc. ("CDW") today announced record sales and earnings for the first quarter ended March 31, 1997, driven by strong volume increases in sales of CPU products, software and peripherals.
Net sales for the first quarter increased 44% to $297,777,000 from $206,705,000 in the same period of 1996. Net income for the quarter totaled $11,359,000, a 105% increase over $5,534,000 in the first quarter of 1996. Earnings per share of $0.52 for the first quarter of 1997 increased 100% from $0.26 in the same period of 1996.
Net income in the 1996 period was reduced by a $3.2 million pre-tax charge to earnings, which included a $4,000,000 non-recurring charge for the estimated costs of exiting the Company's current facility and a related $800,000 reduction in the executive incentive bonus pool. As a result, the executive incentive bonus pool, which is calculated as 20% of the increase in operating income over the prior year, was effectively increased by $800,000 in the first quarter of 1997 compared to the first quarter of 1996. Pro forma net income and earnings per share for the quarters ended March 31, 1997 and 1996, excluding the impact of the exit charge and its related impact on the executive incentive bonus pool, were $11.8 million and $0.55 per share and $7.5 million and $0.35 per share, respectively, representing increases of 58% and 57%, respectively. All earnings per share amounts reflect the 3-for-2 stock split effected in the form of a stock dividend, which was paid on July 15, 1996.
"Our diverse product mix and intense marketing efforts propelled first quarter growth despite a 3% decline in average order size from the first quarter of 1996. Our marketing and sales efforts resulted in a 36% increase in the number of customers serviced to over 200,000 and a 48% increase in the number of orders processed to over 445,000. We are extremely pleased and excited about the increased number of customers serviced, whom we will strive to retain as repeat customers," said Michael P. Krasny, chairman and chief executive officer.
 
"Multi-media products and input devices, data storage devices, desktop computers, software and video products were our fastest growing product categories, based on the percentage increase in dollar sales. Sales of notebook computers remain our largest product category at over 24% of net sales in the first quarter. Apple product sales were less than 5% of net sales. We experienced strong demand for desktop and notebook computers with unit volumes growing over 86% and 71%, respectively, from the first quarter of 1996. We believe the increased volume in notebook and desktop computers is driven by the combined impact of lower unit selling prices, improved product availability and our expanded offerings of brand name products. Our CPU product lines, including offerings from Toshiba, IBM, Compaq, Hewlett Packard and Apple, are well positioned as we move forward," said Gregory C. Zeman, CDW's president.
"We are expanding our sales force and marketing activities to service our customers better and reach more customers with our broad product selection, discounted prices and outstanding service. Our new facility will provide the capacity necessary to add quality account managers to service our expanding customer base. As we look forward to the second quarter, we anticipate that sales will be driven by recent manufacturer price reductions on CPU's, which result in special buying opportunities for our customers such as a Compaq Armada 1130 notebook computer with a 120 MHz Pentium processor, 16 MB RAM, and a 1.08GB hard drive currently selling for $1,099.00, " said Zeman.
First quarter gross profit margin was 13.4% of net sales versus 12.9% in the first quarter of 1996 and 13.2% in the fourth quarter of 1996. The primary reason for the margin improvement is the impact of incremental vendor support programs, many of which are dependent on achieving certain goals and objectives. The Company's gross profit as a percentage of net sales may vary on a quarterly basis based upon vendor support programs, product mix, market conditions and other factors. As a result, there is no certainty that the Company will be able to sustain the gross profit margin at the levels achieved in recent quarters.
Selling and administrative expense, excluding the impact of the exit charge and its related impact on the executive incentive bonus pool, decreased to 7.1% of net sales in the first quarter versus 7.3% in the same quarter of 1996. The decrease relates primarily to a decrease in net advertising expense as a percentage of net sales. Although gross advertising expense increased as a percentage of net sales due to new marketing initiatives, this was offset by an increase in cooperative advertising reimbursements from vendors.
"Our marketing activities in the first quarter included the introduction of "Etc.", our supplies catalog. Total catalog circulation grew 55% to almost 20 million catalogs for the three months ended March 31, 1997 versus the same period in the prior year, and also increased by 23% from the fourth quarter of 1996. National advertising pages increased from the prior year period and decreased from the fourth quarter of 1996 as the fourth quarter included holiday promotions," Zeman added.
 
Annualized inventory turnover was 20 times for the three months ended March 31, 1997, versus 26 times for the same period a year ago. Inventory at March 31, 1997 increased to $62.2 million as the Company participated in several buying opportunities offered by vendors at the end of the quarter. Working capital as of March 31, 1997 was approximately $139 million with approximately $62 million in cash, cash equivalents and marketable securities.
"Construction of our new warehouse, distribution, telemarketing and corporate office facility is scheduled for occupancy at the beginning of the third quarter of 1997," said Krasny. "Our new facility should provide the capacity necessary to execute our cost-efficient operating model while continuing our growth."
As previously announced, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission which was declared effective on February 21, 1997, pursuant to which certain Company employees sold an aggregate of 632,064 shares of the Company's common stock. The shares sold included 136,437 shares received upon exercise of options under the MPK Stock Option Plan and 132,064 shares received by participants of the MPK Restricted Stock Plan pursuant to an early vesting modification effected on February 21, 1997 through a separate Registration Statement on Form S-3. The exercise and vesting of the shares pursuant to the MPK Stock Option Plan and MPK Restricted Stock Plan will result in the realization by the Company of a tax benefit of $6,169,000 in 1997, of which $334,000 was previously recorded in deferred taxes. The incremental tax benefit of $5,835,000 was recorded to paid-in capital.
The statements in this release concerning the Company's sales prospects are forward-looking statements that involve certain risks and uncertainties, including the continued acceptance of the Company's distribution channel by vendors and customers, the timely availability and acceptance of new products, in particular, notebook/laptop computers, and continuation of key vendor relationships.
CDW Computer Centers, Inc. is a leading direct marketer of brand name microcomputer products, primarily to business, government, educational, institutional and home office users in the United States. CDW sells a broad range of brand name microcomputer products, including hardware and peripherals, software, networking products and accessories through knowledgeable telemarketing account managers. Sales of products which utilize, or are compatible with, the Microsoft Windows 95/Windows/Windows NT/MS-DOS operating platforms account for substantially all of the Company's net sales. Customers can place orders and obtain product information by calling a CDW account manager at 1-800-800-4CDW, or by visiting CDW on the Internet at http://www.cdw.com. The Company's common stock is traded on the Nasdaq National Market under the symbol CDWC.
| For more information about CDW:
Via fax dial 1- 800-PRO-INFO and enter the ticker symbol -- CDWC.
Visit CDW on the Internet at http://www.cdw.com
Contact CDW Investor Relations via the Internet at shserv@admin.cdw.com
Or by telephone at 847 419-8234.
|
CDW COMPUTER CENTERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| March 31, 1997 | December 31, 1996 |
| ASSETS | | |
| Cash, cash equivalents and marketable securities | $62,081 | $74,952 |
| Accounts receivable, net of allowance for doubtful accounts of $1,310 and $1,100, respectively | 63,842 | 57,396 |
| Miscellaneous receivables | 3,039 | 3,931 |
| Merchandise inventory | 62,203 | 41,462 |
| Prepaid expenses and other current assets | 1,121 | 823 |
| Deferred income taxes | 2,374 | 2,258 |
| Total current assets | 194,660 | 180,822 |
| Property and equipment, net | 3,333 | 3,636 |
| Construction in progress | 11,644 | 8,659 |
| Deferred income taxes and other assets | 5,409 | 5,713 |
| Total assets | $215,046 | $198,830 |
|
| LIABILITIES AND SHAREHOLDER'S EQUITY | | |
| Current liabilities | | |
| Accounts payable | 40,449 | 36,642 |
| Accrued expenses and other current liabilities | 11,684 | 16,579 |
| Accrued exit costs | 3,937 | 3,987 |
| Total current liabilities | 56,070 | 57,208 |
| Shareholder's equity | 158,976 | 141,622 |
| Total liabilities and shareholder's equity | $215,046 | $198,830 |
CDW COMPUTER CENTERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
| Three Months
Ended March 31 |
| 1997 | 1996 |
| | |
| Net Sales | $297,777 | $206,705 |
| Cost of Sales | 257,834 | 180,058 |
| Gross profit | 39,943 | 26,647 |
| Selling and administrative expenses | 22,027 | 14,356 |
| Exit charge | - | 4,000 |
| Income from operations | 17,916 | 8,291 |
| Interest income, net | 957 | 835 |
| Other income | (51) | (54) |
| Income before income taxes | 18,822 | 9,072 |
| Income tax provision | 7,463 | 3,538 |
| Net income | $11,359 | $5,534 |
| Net income per share* | $0.52 | $0.26 |
| Weighted average number of common and common equivalent shares outstanding* | 21,682 | 21,648 |
*All amounts reflect a three-for-two stock split effected in the form of a stock dividend paid on July 15, 1996.
|
| At The Company |
FINANCIAL RELATIONS BOARD - CHICAGO |
|---|
| Harry J. Harczak, Jr. | Julie Creed |
Michael Rosenbaum
Jeff Wilhoit |
Laura Kuhlmann-Doerer |
| Chief Financial Officer |
Analyst Contact |
General Inquiries |
Media Inquiries |
| (847) 419-6226 |
(312) 266-7800 |
(312) 266-7800 |
(312) 266-7800 |
|
|
