Cdw (NASDAQ:CDWC)
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CDW Corporation (NASDAQ: CDWC):
Sales: $2.033 billion, up 24.4% year-over-year
Average daily sales: $31.763 million, up 24.4% year-over-year
Gross profit: $328.0 million, up 24.2 % year-over-year
Operating income: $123.7 million, up 14.7% year-over-year (includes
merger-related costs)
Net income: $80.1 million, up 9.5% year-over-year (includes
merger-related costs)
Diluted earnings per share: $0.99, up 8.8% year-over-year (includes
merger-related costs)
Non-GAAP diluted earnings per share: $1.05, up 15.4% year-over-year
(excludes merger-related costs)
CDW Corporation (NASDAQ: CDWC), a leading provider of technology
products and services to business, government and education, today
announced record quarterly sales, gross profit, operating income, net
income and diluted earnings per share in the second quarter of 2007. The
Company previously announced June 2007 and second quarter of 2007 sales
results.
Total sales in the second quarter of 2007 were $2.033 billion compared
to $1.633 billion in the second quarter of 2006, an increase of 24.4
percent. Average daily sales in the second quarter of 2007 were $31.763
million compared to $25.523 million in the second quarter of 2006,
representing a 24.4 percent increase. There were 64 billing days in both
the second quarter of 2007 and the second quarter of 2006.
CDW completed the acquisition of Berbee Information Networks on October
11, 2006. Total sales for the second quarter of 2006 do not include
Berbee sales, while the second quarter of 2007 sales include Berbee
sales. Excluding Berbee sales in the second quarter of 2007, and
therefore on a non-GAAP basis, total sales were $1.880 billion, an
increase of 15.1 percent compared to total sales of $1.633 billion for
the second quarter of 2006 and average daily sales for the second
quarter of 2007 were $29.377 million, an increase of 15.1 percent
compared to average daily sales for the second quarter of 2006 of
$25.523 million.
Second Quarter of 2007 Highlights:
Total corporate sector segment sales in the second quarter of 2007
were $1.237 billion compared to $1.112 billion in the second quarter
of 2006, representing an increase of 11.2 percent. Second quarter of
2007 average daily sales for the corporate sector segment were $19.321
million compared to $17.373 million in the second quarter of 2006,
representing an increase of 11.2 percent.
Total public sector segment sales in the second quarter of 2007 were
$643.6 million compared to $521.6 million in the second quarter of
2006, representing an increase of 23.4 percent. Second quarter of 2007
average daily sales for the public sector segment were $10.056 million
compared to $8.150 million in the second quarter of 2006, representing
an increase of 23.4 percent.
While CDW did not own Berbee prior to October 11, 2006, the Company is
providing comparative information for Berbee. Total Berbee sales in
the second quarter of 2007 were $152.7 million compared to $101.7
million in the second quarter of 2006, representing an increase of
50.1 percent. Second quarter of 2007 average daily sales for Berbee
were $2.386 million compared to $1.590 million in the second quarter
of 2006, representing an increase of 50.1 percent. Compared to the
corporate sector and public sector segments, Berbee’s
business model is more project oriented, which can result in a greater
degree of variability in sales on a quarterly basis.
Product categories that achieved the strongest year-over-year unit
volume growth for the second quarter of 2007 were notebook computers,
desktop computers, data storage, software and video. Product
categories exclude Berbee sales.
Direct web sales in the second quarter of 2007 were $588.9 million,
representing a 19.3 percent increase compared to the prior year, and
comprised 31.3 percent of total sales excluding Berbee. Berbee’s
sales are not made on the web due to the higher services component of
the sales.
Gross profit for the second quarter of 2007 was $328.0 million compared
to $264.0 million in the second quarter of 2006, representing a 24.2
percent increase. Gross profit margin was 16.1 percent of sales in the
second quarter of 2007 compared to 16.2 percent of sales in the second
quarter of 2006.
In the second quarter of 2007, CDW recorded $8.0 million pre-tax ($4.9
million after-tax) of costs associated with the previously announced
merger agreement providing for the acquisition of CDW by VH Holdings,
Inc., which upon closing of the merger will be controlled by investment
funds affiliated with Madison Dearborn Partners, LLC and Providence
Equity Partners Inc. (“merger-related costs”).
See supplemental table at the end of the press release for a
reconciliation of GAAP to non-GAAP financial measures.
Selling and administrative expenses as a percentage of sales were 8.5
percent in the second quarter of 2007 compared to 7.7 percent in the
second quarter of 2006 and increased $45.9 million. The increase in
selling and administrative expenses in the second quarter of 2007 was
primarily due to the inclusion of Berbee’s
operating expenses, increased payroll costs as a result of continued
investment in expanding CDW’s sales force,
and merger-related costs of $8.0 million pre-tax ($4.9 million
after-tax). Non-GAAP selling and administrative expenses as a percentage
of sales, which exclude merger-related costs, were 8.1 percent in the
second quarter of 2007 compared to 7.7 percent in the second quarter of
2006. The non-GAAP selling and administrative expenses information is
being presented to provide meaningful comparisons to the prior year
quarterly period.
Advertising expense was $32.2 million, representing 1.6 percent of sales
in the second quarter of 2007 compared to $30.0 million, representing
1.8 percent of sales in the second quarter of 2006.
Operating margin was 6.1 percent in the second quarter of 2007 compared
to 6.6 percent in the second quarter of 2006. Operating income was
$123.7 million in the second quarter of 2007 compared to $107.8 million
in the second quarter of 2006. Operating income for the second quarter
of 2007 included merger-related costs of $8.0 million pre-tax ($4.9
million after-tax). Non-GAAP operating margin based on non-GAAP
operating income of $131.6 million, which excludes merger-related costs,
was 6.5 percent in the second quarter of 2007 compared to 6.6 percent in
the second quarter of 2006. The non-GAAP operating margin information is
being presented to provide meaningful comparisons to the prior year
quarterly period.
Interest income was $5.3 million for the second quarter of 2007 compared
to $5.5 million in the second quarter of 2006. The effective tax rate
for the second quarter of 2007 was 38.0 percent compared to 35.4 percent
for the second quarter of 2006. The effective tax rate for the second
quarter of 2006 included a tax benefit of $2.3 million relating to the
resolution of an audit of the Company's 2003 federal income tax return
that did not repeat in the second quarter of 2007.
Net income was $80.1 million in the second quarter of 2007 compared to
$73.1 million in the second quarter of 2006, an increase of 9.5 percent.
Net income in the second quarter of 2007 included merger-related costs
of $8.0 million pre-tax ($4.9 million after-tax). Non-GAAP net income,
which excludes merger-related costs, was $85.0 million in the second
quarter of 2007 compared to $73.1 million in the second quarter of 2006,
an increase of 16.3 percent. The non-GAAP net income information is
being presented to provide meaningful comparisons to the prior year
quarterly period.
Diluted earnings per share were $0.99 in the second quarter of 2007
compared to diluted earnings per share of $0.91 in the second quarter of
2006. Results for the second quarter of 2007 included merger-related
costs of $8.0 million pre-tax ($4.9 million after-tax) or approximately
$0.06 per diluted share. Non-GAAP diluted earnings per share based on
non-GAAP net income of $85.0 million, which exclude merger-related
costs, were $1.05 in the second quarter of 2007 compared to $0.91 in the
second quarter of 2006. The non-GAAP diluted earnings per share
information is being presented to provide meaningful comparisons to the
prior year quarterly period.
The company plans to release July sales on Monday, August 13, 2007. July
2006 had 20 billing days and July 2007 will have 21 billing days.
About CDW
CDW®, ranked No. 342 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, APC, Apple, Cisco, EMC,
Fujitsu, HP, IBM, Lenovo, Microsoft, Panasonic, Quantum, Samsung, Sony,
Symantec, ViewSonic and Xerox. CDW's direct model offers customers
one-on-one relationships with knowledgeable account managers and access
to approximately 820 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 as of June 30, 2007, employed approximately
5,880 coworkers. In 2006, the company generated sales of $6.8 billion.
For more information, visit CDW.com.
Where You Can Find Additional Information
In connection with the proposed merger between CDW and a subsidiary of
VH Holdings, Inc., CDW filed with the SEC, and has furnished to its
shareholders, a definitive proxy statement soliciting proxies for the
meeting of its shareholders to be held with respect to the Merger on
August 9, 2007. CDW SHAREHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT
CAREFULLY BECAUSE IT CONTAINS IMPORTANT INFORMATION. CDW shareholders
and other interested parties can obtain, without charge, a copy of the
proxy statement and other relevant documents filed with the SEC from the
SEC’s website at http://www.sec.gov.
CDW shareholders and other interested parties can also obtain, without
charge, a copy of the proxy statement and other relevant documents by
directing a request by mail or telephone to CDW Corporation, 200 N.
Milwaukee Ave., Vernon Hills, Illinois 60061, Attention: Corporate
Secretary, telephone: (847) 465-6000, or from CDW’s
website, http://www.cdw.com.
CDW and certain of its directors, executive officers and other members
of management and employees may, under SEC rules, be deemed to be “participants”
in the solicitation of proxies from shareholders of CDW with respect to
the proposed transaction. Information regarding the persons who may be
considered “participants”
in the solicitation of proxies is set forth in the definitive proxy
statement described above.
Statements about the expected timing, completion and effects of the
proposed merger between CDW and a subsidiary of VH Holdings, Inc. and
all other statements in this filing other than historical facts,
constitute forward-looking statements within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned not to place undue reliance on these
forward-looking statements, each of which is qualified in its entirety
by reference to the following cautionary statements. Forward-looking
statements speak only as of the date hereof and are based on current
expectations and involve a number of assumptions, risks and
uncertainties that could cause actual results to differ materially from
those projected in the forward-looking statements. CDW may not be able
to complete the proposed merger because of a number of factors,
including, among other things, the failure to obtain shareholder
approval, the failure of financing or the failure to satisfy other
closing conditions. Other risks and uncertainties that may affect
forward-looking statements are described in the reports filed by CDW
with the SEC under the Securities Exchange Act of 1934, as amended,
including without limitation CDW’s Annual
Report on Form 10-K for the year ended December 31, 2006, and the
definitive proxy statement dated July 13, 2007, relating to the special
meeting of shareholders to be held to vote on the merger agreement.
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 EndedJune 30,
Six Months EndedJune 30,
2007
2006
2007
2006
Net sales
$
2,032,838
$
1,633,458
$
3,891,956
$
3,222,087
Cost of sales
1,704,851
1,369,421
3,262,650
2,704,161
Gross profit
327,987
264,037
629,306
517,926
Selling and administrative expenses
172,117
126,192
326,302
254,940
Advertising expense
32,199
30,007
61,378
60,902
Income from operations
123,671
107,838
241,626
202,084
Interest income
5,336
5,492
9,700
10,699
Other income/(expense), net
234
(94
)
(171
)
(1,056
)
Income before income taxes
129,241
113,236
251,155
211,727
Income tax provision
49,150
40,125
94,284
76,938
Net income
$
80,091
$
73,111
$
156,871
$
134,789
Earnings per share:
Basic
$
1.01
$
0.93
$
1.99
$
1.70
Diluted
$
0.99
$
0.91
$
1.95
$
1.66
Weighted-average number of common shares outstanding:
Basic
79,103
78,994
78,856
79,488
Diluted
80,995
80,564
80,621
81,268
Dividends per share
$
-
$
0.52
$
-
$
0.52
CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30,
2007
December 31,
2006
June 30,
2006
Assets
Current assets:
Cash, cash equivalents and marketable securities
$
580,320
$
351,596
$
444,925
Accounts receivable, net of allowance for doubtful accounts of
$10,089, $9,995, and $9,574, respectively
909,162
850,002
689,824
Merchandise inventory
290,615
261,858
257,035
Miscellaneous receivables
46,837
55,881
50,953
Deferred income taxes
15,047
15,060
14,674
Prepaid expenses and other current assets
18,146
15,139
12,072
Total current assets
1,860,127
1,549,536
1,469,483
Marketable securities
-
40,000
59,261
Property and equipment, net
180,110
171,448
115,780
Goodwill and other intangible assets, net
179,180
183,094
4,277
Other assets
8,370
7,349
6,910
Total assets
$
2,227,787
$
1,951,427
$
1,655,711
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
421,229
$
354,307
$
277,317
Accrued expenses and other current liabilities
183,840
175,074
134,764
Total current liabilities
605,069
529,381
412,081
Long-term liabilities
35,451
34,881
22,138
Shareholders’ equity:
Total shareholders’ equity
1,587,267
1,387,165
1,221,492
Total liabilities and shareholders’
equity
$
2,227,787
$
1,951,427
$
1,655,711
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Three Months Ended June 30, 2007
CorporateSector
Public
Sector
Berbee
Headquarters/ Other
Consolidated
Net sales
$
1,236,516
$
643,603
$
152,719
$
-
$
2,032,838
Income (loss) from operations
$
97,807
$
36,185
$
5,784
$
(16,105)
$
123,671
Net interest income and other expense
5,570
Income before income taxes
$
129,241
Total assets
$
521,462
$
323,215
$
309,337
$
1,073,773
$
2,227,787
Three Months Ended June 30, 2006
CorporateSector
Public
Sector
Berbee
Headquarters/ Other
Consolidated
Net sales
$
1,111,879
$
521,579
$
-
$
-
$
1,633,458
Income (loss) from operations
$
88,896
$
28,950
$
-
$
(10,008)
$
107,838
Net interest income and other expense
5,398
Income before income taxes
$
113,236
Total assets
$
596,065
$
250,747
$
-
$
808,899
$
1,655,711
CDW CORPORATION AND SUBSIDIARIES
SEGMENT REPORTING INFORMATION
(in thousands)
Six Months Ended June 30, 2007
CorporateSector
Public
Sector
Berbee
Headquarters/ Other
Consolidated
Net sales
$
2,455,557
$
1,140,999
$
295,400
$
-
$
3,891,956
Income (loss) from operations
$
195,043
$
61,408
$
10,988
$
(25,813)
$
241,626
Net interest income and other expense
9,529
Income before income taxes
$
251,155
Total assets
$
521,462
$
323,215
$
309,337
$
1,073,773
$
2,227,787
Six Months Ended June 30, 2006
CorporateSector
Public
Sector
Berbee
Headquarters/ Other
Consolidated
Net sales
$
2,262,063
$
960,024
$
-
$
-
$
3,222,087
Income (loss) from operations
$
178,194
$
43,653
$
-
$
(19,763)
$
202,084
Net interest income and other expense
9,643
Income before income taxes
$
211,727
Total assets
$
596,065
$
250,747
$
-
$
808,899
$
1,655,711
CDW CORPORATION AND SUBSIDIARIES
OPERATING DATA
Three Months Ended
June 30,
Six Months Ended
June 30,
2007
2006
2007
2006
Direct web sales (000’s)
$588,872
$493,522
$1,139,716
$994,489
Sales force, end of period (1)
2,722
2,179
2,722
2,179
Annualized inventory turnover
26
23
26
23
Accounts receivable - days sales outstanding
41
38
42
39
(1) Sales force at June 30, 2007 includes 187 Berbee sales force
coworkers.
CDW CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
Three Months
Ended
June 30, 2007
Six Months
Ended
June 30, 2007
Selling and administrative expenses
GAAP selling and administrative expenses
$
172,117
$
326,302
Adjusted for:
Merger acquisition costs
(7,970)
(7,970)
Non-GAAP selling and administrative expenses
$
164,147
$
318,332
Selling and administrative expenses as a percentage of net
sales
GAAP selling and administrative expenses as a percentage of net sales
8.5%
8.4%
Adjusted for:
Merger acquisition costs
(0.4)%
(0.2)%
Non-GAAP selling and administrative expenses as a percentage of net
sales
8.1%
8.2%
Income from operations
GAAP income from operations
$
123,671
$
241,626
Adjusted for:
Merger acquisition costs
7,970
7,970
Non-GAAP income from operations
$
131,641
$
249,596
Income from operations as a percentage of net sales
GAAP income from operations as a percentage of net sales
6.1%
6.2%
Adjusted for:
Merger acquisition costs
0.4%
0.2%
Non-GAAP income from operations as a percentage of net sales
6.5%
6.4%
Net income
GAAP net income
$
80,091
$
156,871
Adjusted for:
Merger acquisition costs, net of income tax
4,941
4,941
Non-GAAP net income
$
85,032
$
161,812
Diluted earnings per share
GAAP diluted earnings per share
$
0.99
$
1.95
Adjusted for:
Merger acquisition costs, net of income tax
0.06
0.06
Non-GAAP diluted earnings per share
$
1.05
$
2.01