Second Quarter 1998
Earnings Release
July 21, 1998
CDW COMPUTER CENTERS, INC.
REPORTS RECORD SALES AND EARNINGS
Second Quarter Highlights:
Twentieth consecutive quarter of sequential sales growth as a public company
34% growth in net sales
Operating income increases 24%
CDW Account Managers increase to 520
Number of customers serviced advances 15%
Initiates new brand marketing program
| Financial & Operating Data* |
Three Months Ended
06/30/98 06/30/97 |
%
Change |
Six Months Ended
06/30/98 06/30/97 |
%
Change |
| Net Sales (000’s) |
$408,945 |
$304,545 |
34% |
$793,536 |
$602,322 |
32% |
| Income from Operations (000’s) |
$ 24,856 |
$ 20,071 |
24% |
$ 48,211 |
$ 37,987 |
27% |
| Net Income (000’s) |
$ 15,588 |
$ 12,700 |
23% |
$ 30,358 |
$ 24,059 |
26% |
| Basic Earnings Per Share |
$ 0.72 |
$ 0.59 |
22% |
$ 1.41 |
$ 1.12 |
26% |
| Diluted Earnings Per Share |
$ 0.72 |
$ 0.59 |
22% |
$ 1.40 |
$ 1.11 |
26% |
| Operating Data |
| Number of Orders Shipped |
557,410 |
424,746 |
31% |
1,135,659 |
869,927 |
31% |
| Average Order Size |
$ 734 |
$ 717 |
2% |
$ 699 |
$ 692 |
1% |
| Number of Account Executives |
520 |
319 |
63% |
|
|
|
| Customers Serviced |
210,000 |
182,000 |
15% |
372,000 |
328,000 |
13% |
| Customers Serviced-Trailing 12 Months |
617,000 |
524,000 |
18% |
|
|
|
"CDW's business remains extremely strong as our co-workers produced another quarter of record results. Our momentum proves there is opportunity for future growth. Our efforts are concentrated on increasing our market share as we grow our sales force, expand our facilities, evolve our Internet strategy through www.cdw.com and initiate new marketing activities intended to brand CDW as the leading direct marketer of brand name computer products."
--- Michael P. Krasny, Chairman and Chief Executive Officer |
Vernon Hills, Illinois, July 21, 1998 --- CDW Computer Centers, Inc. (Nasdaq: CDWC) today announced record sales and earnings for the second quarter ended June 30, 1998.
Net sales for the second quarter increased 34% to $408.9 million from $304.5 million in the same period of 1997. Net income for the quarter rose 23% to $15.6 million from $12.7 million in the second quarter of 1997. Diluted earnings per share increased 22% to $0.72 in the second quarter of 1998 from $0.59 in the same period of 1997.
Net sales for the six months ended June 30, 1998 increased 32% to $793.5 million from $602.3 million in the same period of 1997. Net income for the six months ended June 30, 1998 was $30.4 million, a 26% increase over $24.1 million reported in the first six months of 1997. Diluted earnings per share of $1.40 increased 26% from $1.11 in the first six months of 1997.
"The acceleration of second quarter sales growth reflects our strategy to increase market share with business, government, educational and institutional accounts," said Michael P. Krasny, chairman and chief executive officer. "Sales to these commercial customers accounted for more than 87% of net sales, an increase from 83% in the first quarter of 1998. We believe the increased concentration of commercial customers contributed to the increase in average order size, which countered the impact of declining product prices," said Krasny.
 
Desktop computers were the fastest growing product category in the second quarter of 1998 with net sales dollars increasing approximately 77%. Demand for desktop computers was strong, with unit volume increasing 118% over the second quarter of 1997. The other fastest growing product categories, based on the percentage increase in dollar sales over the second quarter of 1997, were software, data storage devices, network & communications products and printers. Notebook computers, the largest product category at 20% of net sales, decreased in net sales dollars by approximately 5% and unit volume by approximately 12% over the second quarter of 1997. However, notebook sales dollars increased by 3% from the first quarter of 1998 due to the introduction of Pentium II notebooks with 233 and 266 megahertz processing speeds.
Greg Zeman, CDW's president said, "During the quarter, we began to see some stabilization of our average selling price on both desktop and notebook computers as our vendors migrate to their build-to-order programs, thus reducing low cost, late life cycle products in the channel."
Zeman added, "Our Internet Web site, www.cdw.com, is proving to be an integral part of our overall sales and marketing strategy. The number of average daily users on our Web site grew to more than 47,000 in the second quarter, an increase of approximately 8% from the first quarter of 1998. The Web not only serves as an information and productivity tool for many of our customers, it also generated net sales in excess of $25.0 million in the quarter and is a source for new customers."
Gross profit margin was 12.6 % of net sales in the second quarter of 1998. The decline in gross margin, from 13.7% in the prior year and 12.8% in the first quarter of 1998, is primarily due to lower selling margins. The Company's gross profit as a percentage of net sales may vary on a quarterly basis based upon vendor support programs, product mix, pricing strategies, market conditions and other factors. As a result, there is no certainty that the Company will be able to sustain the gross profit margin levels achieved in recent quarters.
Selling and administrative expenses, as a percentage of net sales, decreased to 6.6% in the second quarter of 1998 versus 7.1% in the same quarter of 1997. The decline was due to a decrease in net advertising expense, which was partially offset by increases in payroll costs primarily related to the expansion of our sales force. On a forward-looking basis, selling and administrative costs may increase as a percentage of net sales due to investments in new sales account managers and new marketing initiatives.
Annualized inventory turnover increased to approximately 24 times for the quarter versus 19 in the second quarter of 1997. This improvement is the result of CDW's participation in the build-to-order strategies of the major manufacturers that seek to reduce inventory levels in the channel. Working capital as of June 30, 1998 was $193.7 million, including approximately $82.2 million in cash, cash equivalents and marketable securities.
"We recently announced that CDW is investing in a multi-faceted branding campaign that is redefining the Company's overall marketing, advertising and public relations strategies. The new strategies are designed to highlight what makes CDW the leader in our category and the supplier of choice-our business model and unique aspects of the CDW culture, " said Krasny.
The statements in this release concerning the Company's gross margin percentage and selling and administrative costs and other statements of a non-historical basis (including statements regarding implementing strategies for future growth) 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, continuation of key vendor relationships and support programs and the ability of the Company to hire and retain qualified account managers.
About CDW Computer Centers, Inc.
A Fortune 1000 company, CDW is one of the country's largest and fastest growing direct marketers of brand name microcomputer products. The No. 1 authorized direct marketing source for Compaq, IBM, Microsoft and Toshiba, CDW offers more than 30,000 brand name microcomputer products to business, government, educational, institutional and home office users in the United States. CDW prides itself on unparalleled technical support and customer service, with more than 50 factory-trained and certified technicians, and same day shipment on more than 97 percent of its orders. CDW also strives to set the standard for customized service, completing more than 3,000 custom configurations each week, free of charge.
From its founding in 1984 as a one man, home-based business, today CDW boasts more than 1,400 coworkers whose efforts resulted in net sales for the trailing twelve months ended June 30, 1998 that topped $1.4 billion.
About cdw.com
With more than 47,000 unique visitors and more than 400,000 hits daily on its award-winning Web site-www.cdw.com -CDW brings online commerce to new heights with automated pricing and availability alerts, online shopping lists, sophisticated search capabilities, and innovative promotions and product giveaways. Nearly 27,000 computer products - with detailed specifications for over 7,000 - are available to search and order online, making the Company's Web site an integral component of its business.
| 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 STATEMENTS OF INCOME
(in thousands)
(unaudited)
| |
Three Months
Ended June 30, |
Six Months
Ended June30, |
| |
1998 | 1997 |
1998 | 1997 |
| Net Sales (000’s) |
$408,945 |
$304,545 |
$793,536 |
$602,322 |
| Cost of Sales |
357,238 |
262,888 |
692,682 |
520,722 |
| Gross profit (000’s) |
51,707 |
41,657 |
100,854 |
81,600 |
| Selling and administrative expenses |
26,851 |
21,586 |
52,643 |
43,613 |
| Income from operations |
24,856 |
20,071 |
48,211 |
37,987 |
| Interest income |
1,042 |
1,032 |
2,211 |
1,989 |
| Other expense |
(91) |
(60) |
(162) |
(111) |
| Income before income taxes |
25,807 |
21,043 |
50,260 |
39,865 |
| Income tax provision |
10,219 |
8,343 |
19,902 |
15,806 |
| Net income |
$ 15,588 |
$ 12,700 |
$ 30,358 |
$ 24,059 |
Earnings per share
|
| Basic |
$0.72 |
$0.59 |
$1.41 |
$1.12 |
| Diluted |
$0.72 |
$0.59 |
$1.40 |
$1.11 |
Weighted average number of common shares outstanding (000’s)
|
| Basic |
21,546 |
21,525 |
21,546 |
21,525 |
| Diluted |
21,682 |
21,673 |
21,718 |
21,677 |
CDW COMPUTER CENTERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| June 30, 1998 | December 31, 1997 |
| ASSETS | | |
| Cash, cash equivalents and marketable securities | $82,245 | $79,425 |
| Accounts receivable, net of allowance for doubtful accounts of $2,475 and $1,950, respectively | 119,427 | 87,524 |
| Miscellaneous receivables | 4,975 | 3,960 |
| Merchandise inventory | 48,946
| 61,941 |
| Prepaid expenses and other current assets | 889 | 759 |
| Deferred income taxes | 3,587 | 3,587 |
| Total current assets | 260,069
| 237,196 |
| Property and equipment, net | 32,073 | 26,704 |
| Deferred income taxes and other assets | 5,747 | 5,741 |
| Total assets | $297,889
| $269,641 |
|
| LIABILITIES AND SHAREHOLDER'S EQUITY | | |
| Current liabilities | | |
| Accounts payable | $46,758
| $44,451 |
| Accrued expenses and other current liabilities | 16,536 | 21,933 |
| Accrued exit costs | 3,055 | 3,391 |
| Total current liabilities | 66,349 | 69,775 |
| Shareholder's equity | 231,540 | 199,866 |
| Total liabilities and shareholder's equity | $297,889 | $269,641 |
|
|
CDW Computer Centers, Inc. | Fleishman-Hillard (Chicago) |
|
Harry J. Harczak, Jr. | Sharon J. Erikson |
|
Chief Financial Officer | General Inquiries |
|
(847) 419-6226 | (312) 751-8878 |
|
|
