Exhibit 99
CDW Reports Third Quarter Results
Company Achieves Record Quarterly Revenue and Earnings per Share
VERNON HILLS, Ill.--(BUSINESS WIRE)--Oct. 18, 2006--CDW
Corporation (NASDAQ:CDWC):
-- Average daily sales: $27.610 million, up 5.8% year-over-year
-- Sales: $1.739 billion, up 4.1% year-over-year
-- Diluted earnings per share: $0.98, up 11.4% year-over-year
-- Gross profit: $267.9 million, up 5.1% year-over-year
-- Net income: $77.7 million, up 6.3% year-over-year
CDW Corporation (NASDAQ: CDWC) achieved record quarterly sales,
gross profit, net income and diluted earnings per share in the third
quarter of 2006.
Total sales in the third quarter of 2006 were $1.739 billion
compared to $1.670 billion in the third quarter of 2005, an increase
of 4.1 percent. Average daily sales in the third quarter of 2006 were
$27.610 million compared to $26.097 million in the third quarter of
2005, representing a 5.8 percent increase. The third quarter of 2006
had 63 billing days and the third quarter of 2005 had 64 billing days.
Gross profit for the third quarter of 2006 was $267.9 million
compared to $254.9 million in the third quarter of 2005, an increase
of 5.1 percent. Net income increased 6.3 percent for the third quarter
of 2006 to $77.7 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 123R") relating to stock options as of January 1, 2006, and a
reduction in the effective tax rate. Diluted earnings per share were
$0.98 in the third quarter of 2006, an increase of 11.4 percent
compared to diluted earnings per share of $0.88 in the third quarter
of 2005. The third quarter of 2006 included stock-based compensation
expense of $2.5 million after tax ($4.0 million pre-tax), or $0.03 per
diluted share due to the implementation of SFAS 123R, and $0.05 per
diluted share from a lower effective tax rate.
"Our third quarter performance established another set of records
for CDW. We continue to focus on profitable growth and creating an
unmatched experience for our customers," said John A. Edwardson,
chairman and chief executive officer.
"To meet specific customer needs and maximize our sales coverage,
we have increasingly segmented our customers based on industry
verticals and geography over the past several years. Our long-term
strategy of segmentation of the public sector has resulted in strong
and profitable growth. In the first half of 2006, we applied this
strategy to the corporate sector by segmenting most of our medium and
large corporate customers into geographic regions, and organizing our
corporate sales teams accordingly. Medium and large corporate sector
account managers are continuing to build relationships with customers
whose accounts have been transferred into regions. The corporate
sector is still in the implementation stage and we are confident this
is the right approach for the long term. We are focused on executing
the segmentation strategy and accelerating growth in the corporate
sector," said Edwardson.
"We are excited about our recent acquisition of Berbee Information
Networks Corporation, one of the nation's largest independent IT
solution providers. Our organizations are both industry leaders
committed to superior customer service and profitable growth. Together
we will offer customers a single source for their core technology
needs and more advanced IT services and solutions. In addition, we
expect to scale Berbee's business processes to generate additional
growth opportunities," said Edwardson.
Third Quarter Highlights:
-- Total corporate sector segment sales in the third quarter of
2006 were $1.088 billion compared to $1.117 billion in the
third quarter of 2005, representing a decrease of 2.5 percent.
Third quarter of 2006 average daily sales for the corporate
sector segment were $17.276 million compared to $17.448
million in the third quarter of 2005, representing a decrease
of 1.0 percent.
-- Total public sector segment sales in the third quarter of 2006
were $651.1 million compared to $553.5 million in the third
quarter of 2005, representing an increase of 17.6 percent.
Third quarter of 2006 average daily sales for the public
sector segment were $10.335 million compared to $8.649 million
in the third quarter of 2005, representing an increase of 19.5
percent.
-- Product categories that achieved the strongest year-over-year
unit volume growth for the quarter on an average daily basis
included notebook CPUs, software, printers, net comm, video,
memory, and input devices.
-- Direct web sales in the third quarter of 2006 were $496.3
million, representing a 9.0 percent increase compared to the
same period a year ago, and comprised 28.5 percent of total
sales.
-- September 2006 sales were $593.9 million compared to $592.8
million in September 2005, representing a 0.2 percent
increase. September 2006 average daily sales were $29.697
million compared to $28.228 million in the prior period,
representing a 5.2 percent increase. September 2006 had 20
billing days and September 2005 had 21 billing days. In
September 2006, corporate sector segment sales decreased 1.4
percent on an average daily basis and public sector segment
sales increased 17.6 percent on an average daily basis.
Gross profit margin was 15.4 percent in the third quarter of 2006
compared to 15.3 percent in the same period of 2005. The increase was
primarily due to improved product margin.
Selling and administrative expenses as a percentage of sales were
7.3 percent in the third quarter of 2006 compared to 6.8 percent in
the third quarter of 2005. The increase in selling and administrative
expenses in the third quarter of 2006 was primarily due to:
-- Incremental costs of $5.0 million associated with the
operations of the company's new distribution center in North
Las Vegas, Nevada, and additional leased office space in
Chicago and Vernon Hills, Illinois. As previously announced,
these infrastructure investments are being made to position
the company for future growth.
-- Stock-based compensation expense of $4.0 million due to the
required implementation of SFAS 123R on January 1, 2006, as
previously announced.
-- Increased sales commission expense due to the achievement of a
stronger gross profit margin compared to the prior year
period.
-- 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.
Operating margin was 6.4 percent in the third quarter of 2006
compared to 6.7 percent in the third quarter of 2005.
Interest income was $5.2 million for the third 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 third quarter of
2006 was 33.2 percent compared to 36.9 percent for the third quarter
of 2005. The year-over-year decrease in the effective tax rate is
primarily due to a $5 million tax benefit recognized in the third
quarter of 2006 for the reduction of tax reserves due to the
expiration of the statute of limitations for the tax year to which
they relate.
Share Repurchase Activity
During the third quarter of 2006, CDW repurchased 300,000 shares
of common stock at an average price of $52.42 per share for an
aggregate purchase price of $16 million. Under the current share
repurchase program approved in April 2006 for the repurchase of 5.0
million shares, 3.2 million shares remain available for purchase. CDW
has returned a total of $269 million to shareholders in the first nine
months of 2006 comprised of $228 million of share repurchases and an
annual cash dividend of $41 million.
The company plans to release October sales on Wednesday, November
8, 2006. October 2005 had 21 billing days and October 2006 will have
22 billing days.
Forward Looking Statement
Any forward-looking statements 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, 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, Adobe, Apple, Cisco, HP, IBM, Lenovo,
Microsoft, Panasonic, Samsung, Sony, Symantec, Toshiba and ViewSonic.
CDW's direct model offers customers one-on-one relationships with
knowledgeable account managers and access to more than 600 on-staff
engineers and advanced technology specialists who customize solutions
for customers' complex technology needs. CDW also provides same-day
product shipping and post-sales technical support.
CDW was founded in 1984 and employs approximately 5,250 coworkers.
In 2005, the company generated sales of $6.3 billion. For more
information, visit CDW.com.
A live web cast of CDW's management discussion of the third
quarter of 2006 results will be available at www.cdw.com/investor. The
web cast will begin today, October 18, 2006, at 9:30 a.m. ET / 8:30
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 at http://www.cdw.com. Contact CDW
Investor Relations 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 Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $1,739,457 $1,670,204 $4,961,544 $4,684,881
Cost of sales 1,471,586 1,415,261 4,175,747 3,966,031
----------- ----------- ----------- -----------
Gross profit 267,871 254,943 785,797 718,850
Selling and
administrative
expenses 127,416 112,670 382,356 320,233
Advertising expense 28,964 29,843 89,866 85,969
----------- ----------- ----------- -----------
Income from
operations 111,491 112,430 313,575 312,648
Interest income 5,167 3,662 15,866 10,830
Other expense, net (361) (284) (1,417) (1,133)
----------- ----------- ----------- -----------
Income before income
taxes 116,297 115,808 328,024 322,345
Income tax provision 38,563 42,684 115,501 120,763
----------- ----------- ----------- -----------
Net income $ 77,734 $ 73,124 $ 212,523 $ 201,582
=========== =========== =========== ===========
Earnings per share:
Basic $ 1.00 $ 0.91 $ 2.69 $ 2.47
=========== =========== =========== ===========
Diluted $ 0.98 $ 0.88 $ 2.63 $ 2.40
=========== =========== =========== ===========
Weighted-average
number of common
shares outstanding:
Basic 77,890 80,526 78,956 81,487
=========== =========== =========== ===========
Diluted 79,459 82,957 80,674 83,993
=========== =========== =========== ===========
Dividends per share $ 0.00 $ 0.00 $ 0.52 $ 0.43
=========== =========== =========== ===========
CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31, September 30,
2006 2005 2005
------------- ------------- -------------
Assets
Current assets:
Cash, cash equivalents
and marketable
securities $ 521,273 $ 571,750 $ 525,334
Accounts receivable, net
of allowance for
doubtful accounts of
$9,574, $9,564 and
$9,910 respectively 738,600 637,245 668,660
Merchandise inventory 285,165 243,564 258,720
Miscellaneous
receivables 40,141 27,848 31,684
Deferred income taxes 16,298 12,562 13,718
Prepaid expenses 15,713 8,274 5,712
------------- ------------- -------------
Total current assets 1,617,190 1,501,243 1,503,828
Marketable securities 50,000 39,176 64,317
Property and equipment,
net 119,263 97,277 92,690
Other assets 14,449 11,360 10,709
------------- ------------- -------------
Total assets $ 1,800,902 $ 1,649,056 $ 1,671,544
============= ============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 340,254 $ 245,201 $ 299,866
Accrued expenses and
other current
liabilities 131,996 122,560 128,595
------------- ------------- -------------
Total current
liabilities 472,250 367,761 428,461
Long-term liabilities 22,729 16,730 16,464
Shareholders' equity:
Total shareholders'
equity 1,305,923 1,264,565 1,226,619
------------- ------------- -------------
Total liabilities
and
shareholders'
equity $ 1,800,902 $ 1,649,056 $ 1,671,544
============= ============= =============
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Three Months Ended September 30, 2006
----------------------------------------------------
Headquarters
Corporate Public /
Sector Sector Other Consolidated
----------- ----------- ------------ ------------
Net sales $1,088,364 $ 651,093 $ - $ 1,739,457
=========== =========== ============ ============
Income (loss)
from operations $ 83,805 $ 36,867 $ (9,181) $ 111,491
=========== =========== ============
Net interest
income and other
expense 4,806
------------
Income before
income taxes $ 116,297
============
Total assets $ 637,714 $ 299,297 $ 863,891 $ 1,800,902
=========== =========== ============ ============
Three Months Ended September 30, 2005
----------------------------------------------------
Headquarters
Corporate Public /
Sector Sector Other Consolidated
----------- ----------- ------------ ------------
Net sales $1,116,658 $ 553,546 $ - $ 1,670,204
=========== =========== ============ ============
Income (loss)
from operations $ 88,582 $ 32,414 $ (8,566) $ 112,430
=========== =========== ============
Net interest
income and other
expense 3,378
------------
Income before
income taxes $ 115,808
============
Total assets $ 447,826 $ 271,559 $ 952,159 $ 1,671,544
=========== =========== ============ ============
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Nine Months Ended September 30, 2006
----------------------------------------------------
Headquarters
Corporate Public /
Sector Sector Other Consolidated
----------- ----------- ------------ ------------
Net sales $3,350,427 $1,611,117 $ - $ 4,961,544
=========== =========== ============ ============
Income (loss)
from operations $ 261,999 $ 80,520 $ (28,944) $ 313,575
=========== =========== ============
Net interest
income and other
expense 14,449
------------
Income before
income taxes $ 328,024
============
Total assets $ 637,714 $ 299,297 $ 863,891 $ 1,800,902
=========== =========== ============ ============
Nine Months Ended September 30, 2005
----------------------------------------------------
Headquarters
Corporate Public /
Sector Sector Other Consolidated
----------- ----------- ------------ ------------
Net sales $3,281,442 $1,403,439 $ - $ 4,684,881
=========== =========== ============ ============
Income (loss)
from operations $ 253,141 $ 84,121 $ (24,614) $ 312,648
=========== =========== ============
Net interest
income and other
expense 9,697
------------
Income before
income taxes $ 322,345
============
Total assets $ 447,826 $ 271,559 $ 952,159 $ 1,671,544
=========== =========== ============ ============
CDW CORPORATION AND SUBSIDIARIES
OPERATING DATA
- ----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------
2006 2005 2006 2005
----------------------------------------------
% of sales to commercial
customers (1) 99.1% 99.1% 99.1% 98.8%
Direct web sales (000's) $496,275 $455,298 $1,490,764 $1,314,389
Sales force, end of
period 2,211 2,061 2,211 2,061
Annualized inventory
turnover 24 25 23 24
Accounts receivable -
days sales outstanding 39 37 41 39
- ----------------------------------------------------------------------
(1) Commercial customers are defined as public sector and corporate
customers excluding consumers.
CONTACT: CDW Corporation
Investor Inquiries
Cindy Klimstra, 847-968-0268
Vice President, Investor Relations
or
Media Inquiries
Gary Ross, 847-371-5048
Senior Manager, Corporate Communications