Second Quarter 1997 Earnings Release July 31, 1997 CDW COMPUTER CENTERS, INC. REPORTS RECORD SALES AND EARNINGS Second Quarter Highlights: Sixteenth consecutive quarter of sequential sales growth as a public company 39% growth in net sales Operating income increases 54% Operating income accelerates to 6.6% of net sales Move to new facility completed in July New direct contract with Compaq Financial & Operating Data* Three Months 06/30/97 06/30/96 % Change Six Months 06/30/97 06/30/96 % Change Net Sales (000’s) $304,545 $218,687 39% $602,322 $425,392 42% Income from Operations (000’s) $ 20,071 $ 13,061 54% $ 37,987 $ 21,352 78% Net Income (000’s) $ 12,700 $ 8,494 50% $ 24,059 $ 14,028 72% Net Income Per Share 0.59 0.39 51% 1.11 0.65 71% O/S Shares 21,673 21,810 -.6% 21,677 21,729 -.2% Pro forma - Excluding Exit Charge Income from Operations (000’s) $ 38,787 $ 24,552 58% Net Income (000’s) $ 24,541 $ 15,980 54% Net Income Per Share $1.13 $0.74 53% Operating Data Number of Orders Shipped 424,746 301,813 41% 869,927 601,743 45% Average Order Size $ 717 $ 725 -1% $ 692 $ 707 -2% # account managers, end of period 319 256 25% Catalogs Mailed (000’s) 19,172 12,904 49% 39,156 25,812 52% Pages of National Advertising Placed 185 159 16% 397 309 28% Customers Serviced 182 146 25% 328 254 29% Customers Serviced - TTM 524 419 25% "We are excited that we were able to increase sequential quarterly sales and set a new quarterly earnings record, all while preparing for the move to our new facility. We are pleased to report that we completed the move to the new facility and began shipping on July 7, 1997. Thanks to the efforts of our dedicated coworkers the move was completed on schedule and with only minor interruptions to customer service. We are excited about the opportunity that our new facility provides for us to improve customer service and increase our business in the years to come." --- Michael P. Krasny, Chairman and Chief Executive Officer Vernon Hills, Illinois, July 31, 1997 --- CDW Computer Centers, Inc. ("the Company") today announced record sales and earnings for the second quarter and six months ended June 30, 1997, driven by strong volume increases in sales of CPU products, software and peripherals. Net sales for the second quarter increased 39% to $304,545,000 from $218,687,000 in the same period of 1996. Net income for the quarter totaled $12,700,000, a 50% increase over $8,494,000 in the second quarter of 1996. Earnings per share of $0.59 for the second quarter of 1997 increased 51% from $0.39 in the same period of 1996. Net sales for the six months ended June 30, 1997 increased 42% to $602,322,000 from $425,392,000 in the same period of 1996. Net income for the six months ended June 30, 1997 was $24,059,000, a 72% increase over $14,028,000 reported in the first six months of 1996. Earnings per share of $1.11 increased 71% from $0.65 in the first six months of 1996. Net income in the six months ended June 30, 1996 was reduced by a pre-tax charge to earnings of $3,200,000, which included a $4,000,000 non-recurring charge for the estimated costs of exiting the Company's now-vacant Buffalo Grove facility and a related $800,000 reduction in the executive incentive bonus pool. As a result, the executive incentive bonus pool in the first quarter of 1997, which is calculated as 20% of the increase in operating income over the prior year, was effectively increased by $800,000. Pro forma net income and earnings per share for the six months ended June 30, 1997 and 1996, excluding the impact of the exit charge and its related impact on the executive incentive bonus pool, were $24,541,000 and $1.13 per share and $15,980,000 and $0.74 per share, respectively, representing increases of 54% and 53%, 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 targeted marketing efforts propelled second quarter growth despite a 1% decline in average order size from the second quarter of 1996. The number of customers serviced increased 25% to 181,612 and the number of orders processed increased 41% to 424,746. The impact of our sales training efforts and commitment to outstanding customer service is demonstrated by the fact that our customers are coming back and generating incremental repeat business," said Michael P. Krasny, chairman and chief executive officer. "Data storage devices, desktop computers, network products, software and printers were our fastest growing product categories, based on the percentage increase in dollar sales in the second quarter of 1996. Sales of notebook computers remain our largest product category at 27% of net sales in the second quarter. We experienced strong demand for notebook and desktop computers with unit volumes growing 82% and 66%, respectively, from the second quarter of 1996. We believe the increased volume in notebook and desktop sales is driven by the combined impact of lower unit selling prices, improved product availability and our expanded offerings of brand name products. Our line-up of CPU products from top tier vendors such as Compaq, Hewlett-Packard, IBM and Toshiba positions us to take advantage of declining prices and corporate upgrade cycles," said Gregory C. Zeman, CDW's president. "Since November, 1995 when we received authorization under a pilot program to distribute Compaq products by mail order, Compaq has grown to become our largest selling line. We are extremely proud to announce that we signed a contract for a direct relationship with Compaq. Under the contract, we may acquire all Compaq products directly from Compaq under "US 1" pricing," said Zeman. "This is a milestone in our relationship with Compaq and will provide the benefits of lower pricing, improved product availability, and enhanced sales, marketing and training support. Our relationship with Compaq will allow us to partake in additional opportunistic purchases such as the Deskpro 2000 desktop unit with a Pentium 133 MHz processor, 1.2 gigabyte hard drive and 16 MB memory currently advertised in our catalog and on our web page at $979.00." Second quarter gross profit margin was 13.7% of net sales versus 13.5% in the second quarter of 1996 and 13.4% in the first quarter of 1997. 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 as a percentage of net sales decreased to 7.1 % of net sales in the second quarter of 1997 versus 7.6% in the same quarter of 1996. For the second quarter of 1997, an increase in net advertising expense due to incremental marketing activities and $200,000 of moving costs were offset by decreases in various components of selling and administrative expenses. The reduction of various components of selling and administrative expenses resulted from improved productivity and leveraging of fixed costs over a larger sales base. Additionally, selling and administrative expense in the second quarter of 1996 included a $280,000 charge related to the trade-in of a computer system. "Total catalog circulation grew 49% to 19,172,000 catalogs for the three months ended June 30, 1997 versus the same period in the prior year. We reduced the level of mailing of our Apple/Macintosh catalogs as that business continues to decline. National advertising pages increased from the prior year period and decreased from the first quarter of 1997 due to seasonal patterns," Zeman added. Annualized inventory turnover was approximately 19 and 24 times for the three and six months ended June 30, 1997, respectively, versus 23 times for each of the same periods a year ago. Working capital as of June 30, 1997 was approximately $146 million with approximately $80 million in cash, cash equivalents and marketable securities. "The move to our new warehouse, distribution, telemarketing and corporate office facility was executed over the July 4th weekend with no significant disruption to customer service. Our estimated total project cost for land acquisition, building construction and equipment purchases is $23-24 million, which is on target with our previous estimate," said Krasny. "As a result of the move to the new facility, our selling and administrative expenses may rise as a percentage of sales due to the increase in occupancy costs and the inefficiencies inherent in the start-up of a new warehouse. We are optimistic that our future growth will allow us to leverage such costs over a higher sales base." The statements in this release concerning the Company's sales prospects and selling and administrative expenses are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties include 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 that 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) June 30, 1997 December 31, 1996 ASSETS Cash, cash equivalents and marketable securities $80,355 $74,952 Accounts receivable, net of allowance for doubtful accounts of $1,500 and $1,100, respectively 65,917 57,396 Miscellaneous receivables 1,989 3,931 Merchandise inventory 47,012 41,462 Prepaid expenses and other current assets 1,080 823 Deferred income taxes 2,374 2,258 Total current assets 198,727 180,822 Property and equipment, net 3,082 3,636 Construction in progress 17,483 8,659 Deferred income taxes and other assets 5,411 5,713 Total assets $224,703 $198,830 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Accounts payable $28,228 36,642 Accrued expenses and other current liabilities 20,743 16,579 Accrued exit costs 3,931 3,987 Total current liabilities 52,902 57,208 Shareholder's equity 171,801 141,622 Total liabilities and shareholder's equity $224,703 $198,830 CDW COMPUTER CENTERS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended June 30 1997 1996 Net Sales $304,545 $218,687 Cost of Sales 262,888 189,071 Gross profit 41,657 29,616 Selling and administrative expenses 21,586 16,555 Exit charge - - Income from operations 20,071 13,061 Interest income 1,032 842 Other income (60) (44) Income before income taxes 21,043 13,859 Income tax provision 8,343 5,365 Net income $12,700 $8,494 Net income per share* $0.59 $0.39 Weighted average number of common and common equivalent shares outstanding* 21,673 21,810 *All amounts reflect a three-for-two stock split effected in the form of a stock dividend paid on July 15, 1996. Six Months Ended June 30 1997 1996 Net Sales $602,322 $425,392 Cost of Sales 520,722 369,129 Gross profit 81,600 56,263 Selling and administrative expenses 43,613 30,911 Exit charge - 4,000 Income from operations 37,987 21,352 Interest income 1,989 1,677 Other income (111) (98) Income before income taxes 39,865 22,931 Income tax provision 15,806 8,903 Net income $24,059 $14,028 Net income per share* $1.11 $0.65 Weighted average number of common and common equivalent shares outstanding* 21,677 21,729 *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