Third Quarter 1997 Earnings Release October 16, 1997 CDW COMPUTER CENTERS, INC. REPORTS RECORD RESULTS Third Quarter Highlights: Seventeenth consecutive quarter of sequential sales growth as a public company 35% growth in net sales Operating income increases 34% Completed relocation to new 200,000 square foot facility Financial & Operating Data* Three Months 09/30/97 09/30/96 % Change Nine Months 09/30/97 09/30/96 % Change Net Sales (000's) $323,901 $240,330 35% $926,223 $665,722 39% Income from Operations (000's) $ 20,412 $ 15,284 34% $ 58,399 $ 36,636 59% Net Income (000's) $ 13,001 $ 9,679 34% $ 37,060 $ 23,707 56% Net Income Per Share 0.60 0.44 36% 1.71 1.09 57% O/S Shares (000's) 21,761 21,832 -.3% 21,703 21,763 -.3% Pro forma - Excluding Exit Charge Income from Operations (000's) $ 59,199 $ 39,836 49% Net Income (000's) $ 37,542 $ 25,649 46% Net Income Per Share $1.73 $1.18 47% Operating Data Number of Orders Shipped 440,369 342,247 29% 1,310,296 943,990 39% Average Order Size $ 736 $ 702 5% $ 707 $ 705 .3% # account managers, end of period 336 267 26% Customers Serviced (000's) 184 158 16% 443 358 24% Customers Serviced - TTM 542 444 22% "We are proud to announce record third quarter results that were achieved despite some unusual challenges during the quarter. We successfully completed the move to our new 200,000 square foot facility, only to be confronted by the challenges of the UPS strike. During the strike, our coworkers were resourceful in finding innovative ways to service our customers despite the delays existing throughout the country. Now that the move and UPS strike are behind, our goal is to expand our sales and marketing efforts and capture additional market share." --- Michael P. Krasny, Chairman and Chief Executive Officer Vernon Hills, Illinois, October 16, 1997 --- CDW Computer Centers, Inc. (Nasdaq: CDWC) today announced record sales and earnings for the third quarter and nine months ended September 30, 1997, despite the disruption to its business from both its relocation and the UPS strike. Net sales for the third quarter increased 35% to $323.9 million from $240.3 million in the same period of 1996. Net income for the quarter rose 34% to $13.0 million from $9.7 million in the third quarter of 1996. Earnings per share for the quarter increased 36% to $0.60 in the third quarter of 1997 from $0.44 in the same period of 1996. Net sales for the nine months ended September 30, 1997 increased 39% to $926.2 million from $665.7 million in the same period of 1996. Net income for the nine months ended September 30, 1997 rose 56% to $37.1 million from $23.7 million reported in the first nine months of 1996. Earnings per share increased 57% to $1.71 from $1.09 in the first nine months of 1996. Net income in the nine months ended September 30, 1996 was reduced by a pre-tax charge to earnings of $3.2 million. This charge included a $4.0 million non-recurring charge for the estimated costs of exiting the Company's now-vacant Buffalo Grove facility, offset by a related $800,000 reduction in the executive incentive bonus pool. Pro forma net income and earnings per share for the nine months ended September 30, 1997 and 1996, excluding the impact of the exit charge and its related impact on the executive incentive bonus pool in both years, increased 46% and 47%, respectively, to $37.5 million and $1.73 per share in 1997 from $25.6 million and $1.18 per share in 1996. 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. "The UPS strike impacted both our cost structure and sales momentum. On the cost side, we absorbed all incremental shipping and labor costs to minimize disruption to customer service. During the strike, our sales volume decreased by approximately 10% per day as customers modified purchasing patterns due to the uncertainty and shipping delays caused by the strike. Additionally, catalog mailings were delayed due to the constraints placed on the postal service. We estimate that the strike resulted in approximately $3.0 million to $5.0 million in lost sales and approximately $300,000 in direct incremental costs, for a reduction in earnings per share of $0.01 to $0.02," said Michael P. Krasny, chairman and chief executive officer. "Our sales growth in the quarter resulted from the combined impact of increases in the number of customers serviced, number of orders shipped and the average order size. Our sales training and marketing efforts are producing incremental sales to existing customers while also attracting new customers to CDW," said Krasny. Desktop computers, printers, network products, video products and software were the fastest growing product categories, based on the percentage increase in dollar sales over the third quarter of 1996. Sales of notebook computers remained the largest product category at 26% of net sales in the third quarter. Unit volumes of notebook and desktop computers were strong with growth rates of 67% and 87%, respectively, over the third quarter of 1996. "As we deepen our relationships with top tier computer manufacturers such as Compaq, Hewlett-Packard, IBM and Toshiba, we believe we are well positioned to take advantage of declining prices, the corporate upgrade cycle, and the increasing utilization of the Internet and corporate networks," said Gregory C. Zeman, CDW's president. Third quarter gross profit margin was 13.3% of net sales versus 13.1% in the third quarter of 1996 and 13.7% in the second quarter of 1997. 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 at the levels achieved in recent quarters. Selling and administrative expense as a percentage of net sales increased to 7.0% of net sales in the third quarter of 1997 versus 6.8% in the same quarter of 1996. For the third quarter of 1997, increases, as a percentage of net sales, in net advertising expense and occupancy costs were partially offset by a reduction of the executive incentive bonus pool. Annualized inventory turnover was approximately 20 times for both the three and nine months ended September 30, 1997 and 1996. Working capital as of September 30, 1997 was $153.3 million, including approximately $65.1 million in cash, cash equivalents and marketable securities. "With the move and strike behind us, we can now focus our efforts on improving the efficiency of our new warehouse, expanding our sales force and refining our marketing activities. We are excited about our vision for the future as faster processing speeds, increasing bandwidth and sophisticated software products from our manufacturers continue to drive the corporate upgrade cycle," said Krasny. The statements in this release concerning the Company's future prospects 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. (Nasdaq:CDWC) 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. 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) September 30, 1997 December 31, 1996 ASSETS Cash, cash equivalents and marketable securities $65,104 $74,952 Accounts receivable, net of allowance for doubtful accounts of $1,750 and $1,100, respectively 85,089 57,396 Miscellaneous receivables 2,979 3,931 Merchandise inventory 63,413 41,462 Prepaid expenses and other current assets 757 823 Deferred income taxes 2,374 2,258 Total current assets 219,716 180,822 Property and equipment, net 25,814 3,636 Construction in progress 464 8,659 Deferred income taxes and other assets 5,413 5,713 Total assets $251,407 $198,830 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Accounts payable $48,463 36,642 Accrued expenses and other current liabilities 14,393 16,579 Accrued exit costs 3,569 3,987 Total current liabilities 66,425 57,208 Shareholder's equity 184,982 141,622 Total liabilities and shareholder's equity $251,407 $198,830 CDW COMPUTER CENTERS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended September 30 1997 1996 Net Sales $323,901 $240,330 Cost of Sales 280,921 208,744 Gross profit 42,980 31,586 Selling and administrative expenses 22,568 16,302 Exit charge - - Income from operations 20,412 15,284 Interest income 1,194 896 Other expense (63) (48) Income before income taxes 21,543 16,132 Income tax provision 8,542 6,453 Net income $13,001 $9,679 Net income per share* $0.60 $0.44 Weighted average number of common and common equivalent shares outstanding* 21,761 21,832 *All amounts reflect a three-for-two stock split effected in the form of a stock dividend paid on July 15, 1996. Nine Months Ended September 30 1997 1996 Net Sales $926,223 $665,722 Cost of Sales 801,643 577,873 Gross profit 124,580 87,849 Selling and administrative expenses 66,181 47,213 Exit charge - 4,000 Income from operations 58,399 36,636 Interest income 3,183 2,573 Other expense (174) (146) Income before income taxes 61,408 39,063 Income tax provision 24,348 15,356 Net income $37,060 $23,707 Net income per share* $1.71 $1.09 Weighted average number of common and common equivalent shares outstanding* 21,703 21,763 *All amounts reflect a three-for-two stock split effected in the form of a stock dividend paid on July 15, 1996. Traded: Nasdaq: CDWC 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