CDW Computer Centers, Inc. Reports Earnings Per Share of $0.49 for Third Quarter
Matches Record Quarterly Earnings Per Share
VERNON HILLS, Ill., Oct. 17 -- CDW Computer Centers, Inc.
(Nasdaq: CDWC) today announced earnings per diluted share for the third
quarter of $0.49, equal to the record $0.49 earnings per diluted share
reported for third quarter 2000. Net sales for the quarter were
$991.1 million versus $1.028 billion for the same period last year.
Year to date earnings per diluted share rose 8 percent to $1.42 versus
$1.32 for the first nine months of 2000. Year to date net sales increased to
$2.973 billion versus $2.835 billion during the same period in 2000.
Chairman and chief executive officer John A. Edwardson said, "CDW
continues to significantly outpace the industry. Considering continuing
challenges in the economy and the tragic events of September 11, sales were
quite strong and gross margin continued to improve. I firmly believe that
CDW`s achievements exceed those of the technology market because of the
spirit, dedication and hard work of our coworkers.
"Sales to government and education customers, which have performed well
all year, continue to demonstrate healthy growth. Sales to business
customers, while experiencing a moderate decline compared with this period
last year, showed improvement throughout the quarter. Our ability to provide
multi-branded solutions to a diversified mix of customers has enabled us to
continue to perform well financially, highlighting the strength and
sustainability of the CDW business model," stated Edwardson.
"CDW continues to increase market share by growing our customer base. We
served the technology needs of more than 348,000 customers over the trailing
12 months, a 14 percent increase versus this period last year," said Gregory
Zeman, CDW`s vice chairman.
Software, input devices and printers were the fastest-growing product
categories, all with sales growth rates exceeding 8 percent versus the third
quarter of 2000. Software was the Company`s largest product category at 17
percent of net sales, experiencing a growth rate of approximately 43 percent
versus the third quarter 2000. Software sales were particularly strong for
Microsoft products, as well as in the areas of anti-virus, security, backup,
and database software. "The breadth and diversity of our product line enables
us to continue to respond to the changing needs in the market place and
perform well despite the declines we have experienced in revenue from CPU
based products. In total, sales of desktop computers, servers, and notebooks
decreased 27 percent this quarter versus third quarter 2000 due to declining
average selling prices. Total unit volume of these products increased 2
percent over the prior year quarter, with increases in desktops and servers
offsetting declines in notebooks," stated Zeman.
"Our account manager base at the end of the third quarter was 1,209,
representing 15 percent growth over the prior year period and a slight
increase over last quarter. We continue to hire primarily for attrition, and
will adjust our hiring plans as market conditions dictate."
Sales from users of CDW@work(TM), the Company`s custom-tailored Web site
program, were approximately 63 percent of total third quarter sales. These
sales were generated from the more than 89,000 active users of CDW@work(TM),
who place orders either online or directly with their account managers,
consistent with CDW`s `clicks and people` strategy.
The gross profit margin was 13.5 percent of net sales in the third quarter
of 2001, an increase from 12.8 percent in the prior year quarter. The
increase in gross margin is primarily due to changes in product mix,
continuing strength in vendor incentives, and the impact of software upgrade
insurance and third party services revenue that are accounted for on a net
basis. These items were partially offset by decreases in margin due to
pricing pressure in certain product categories. The Company`s gross profit as
a percentage of net sales may vary on a quarterly basis based upon vendor
support programs, including inventory price protection policies, 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 the third quarter.
Selling and administrative expenses, as a percentage of net sales,
increased to 6.6 percent in the third quarter of 2001 from 5.8 percent in the
same period of 2000. The primary reasons for the change were increased
payroll and occupancy costs, partially offset by a decrease in net advertising
expense. Selling and administrative expenses include approximately
$1.6 million in payroll taxes resulting from stock options exercised in
connection with the secondary stock offering completed in August 2001, which
decreased diluted earnings per share by approximately $0.01. On a forward-
looking basis, selling and administrative expenses may increase as a
percentage of net sales over prior year levels due to investments in new
facilities made earlier in 2001, marketing initiatives and potentially lower
advertising expense reimbursements from vendors, coupled with potentially
lower sales.
Working capital as of September 30, 2001 was $639.3 million, including
approximately $300.2 million in cash, cash equivalents and marketable
securities. During the third quarter, the Company continued its previously
announced 5 million share buyback program and bought 765,000 shares of its
common stock in the open market at an aggregate purchase price of
$25.6 million (approximately $33.46 per share). Since the program`s inception
in January 2001, the Company has purchased a total of approximately
2.7 million shares at an aggregate purchase price of $98.2 million
(approximately $36.37 per share).
"On a forward looking basis, we continue to be cautious regarding overall
market conditions," said Edwardson. "The third quarter is typically the
strongest period for government and education sales, which experienced healthy
growth this quarter. Assuming that our business customers continue to be
affected by the economic slowdown and our government and education customers
experience slower seasonal purchase patterns, we project net sales for the
fourth quarter 2001 in the range of $960 million to $1.000 billion. Earnings
for the fourth quarter of 2001 are currently projected to be $0.44 to $0.48
per diluted share." Actual earnings per share could differ significantly from
this earnings guidance if the Company does not meet the sales estimate, if
gross margins decrease as a percentage of sales from our historical
experience, or for other business or market place reasons.
The statements in this release concerning the Company`s projected sales
growth, earnings per share, gross margin percentage, selling and
administrative costs and other statements of a non-historical basis (including
statements regarding our position relative to the market) 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 continuing development, maintenance and
operation of our IT systems, the timely availability and acceptance of new
products, continuation of key vendor relationships and support programs,
changes and uncertainties in economic conditions that could affect the rate of
IT spending by our customers, changes in pricing by our vendors, our
management transition and the ability of the Company to hire and retain
qualified account managers. Additional discussion regarding these and other
factors affecting the Company`s business and prospects is contained in the
Company`s filings with the Securities and Exchange Commission.
About CDW Computer Centers, Inc.
CDW(R) (Nasdaq: CDWC), ranked No. 435 on the Fortune 500, is a direct
solutions provider of complete, customized technology solutions for
businesses, government agencies and educational institutions nationwide. CDW
is a leading source of technology products and services from companies such as
Cisco, Compaq, Computer Associates, Hewlett-Packard, IBM, Intel, Microsoft,
Toshiba and other top name brands. CDW distributes contracts to end users for
customized and standardized on-site services provided directly by firms such
as Compaq Global Services and DecisionOne. CDW was founded in 1984 as a home-
based business and today employs more than 2,700 coworkers whose efforts
generated net sales of $3.8 billion in 2000. CDW`s direct model offers one-
on-one relationships with highly trained account managers; purchasing by fax,
telephone, the company`s award-winning http://www.cdw.com Web site or customized
CDW@work extranets; custom configured solutions and same day shipping;
flexible financing solutions; and phone and online technical support, with
more than 80 factory-trained and A+ certified technicians on staff.
Additional information can be found by visiting http://www.cdw.com .
A live Web cast of CDW`s management discussion of the third quarter will
be available on http://www.streetevents.com . The Web cast will begin today, October
17, 2001 at 5:00 pm EDT. An audio replay of the call will be available on
http://www.streetevents.com until October 24, 2001. Additional financial and
operational data is provided in a series of supplemental slides available at
http://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 847-419-8234.
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