CDW 2003 Annual Report Download - page 34

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The higher levels of cash were due to cash flows from operations, primarily net income, and tax benefits from
stock options and restricted stock transactions.
The effective income tax rate, expressed as a percentage of income before income taxes, was 39.5% in 2002
and 39.75% in 2001.
Net income in 2002 was $185.2 million, a 9.8% increase from $168.7 million in 2001. Diluted earnings per
share were $2.10 in 2002 and $1.89 in 2001, an increase of 11.1%.
Seasonality
Sales in our corporate segment, which serves primarily business and, to a small extent, consumer markets,
have not historically experienced significant seasonality throughout the year. In contrast, sales in our public
sector segment have historically been higher in the third quarter than in other quarters due to the buying patterns
of federal government and education customers. If sales to public sector customers continue to increase as a
percentage of overall sales, the Company as a whole may experience increased seasonality in future periods.
Liquidity and Capital Resources
Working Capital
We have historically financed our operations and capital expenditures primarily through cash flow from
operations. At December 31, 2003, we had cash, cash equivalents, and marketable securities of $562.4 million
and working capital of $986.4 million, representing an increase of $57.7 million in cash, cash equivalents, and
marketable securities and an increase of $139.5 million in working capital from December 31, 2002. The
increase in working capital was a result of increases in cash, cash equivalents, and marketable securities,
accounts receivable and merchandise inventory, partially offset by increases in accounts payable and accrued
expenses. The increases in these categories are primarily due to our sales growth.
We have an aggregate $70 million available pursuant to two $35 million unsecured lines of credit with two
financial institutions. One line of credit expires in June 2004, at which time we intend to renew the line, and the
other does not have a fixed expiration date. Borrowings under the first credit facility bear interest at the prime rate
less 2.5%, LIBOR plus 0.5% or the federal funds rate plus 0.5%, as determined by the Company. Borrowings
under the second credit facility bear interest at the prime rate less 2.5%, LIBOR plus 0.45% or the federal funds rate
plus 0.45%, as determined by the Company. At December 31, 2003, there were no borrowings under either of the
credit facilities.
We have entered into security agreements with certain financial institutions (“Flooring Companies”) in
order to facilitate the purchase of inventory from various suppliers under certain terms and conditions. The
agreements allow for a maximum credit line of $68.0 million collateralized by inventory purchases financed by
the Flooring Companies. At December 31, 2003 and 2002, we owed the Flooring Companies approximately
$19.6 million and $17.6 million, respectively, which is included in trade accounts payable.
In January 2001, our Board of Directors authorized the purchase of up to 5,000,000 shares of our common
stock. From January 2001 though September 2002, we purchased the 5,000,000 shares authorized to be
repurchased at a total cost of $204.6 million (an average price of $40.92 per share).
In July 2002, our Board of Directors authorized a new share repurchase program of up to 2,500,000 shares
of our common stock. These purchases may be made from time to time in both the open market and private
transactions, as conditions warrant. This program will remain in effect through July 2004 unless earlier
terminated by the Board or completed. Under this repurchase program, we purchased 1,852,424 shares of our
common stock at a total cost of $76.3 million (an average price of $41.20 per share) during the year ended