CDW 2004 Annual Report Download - page 31

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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 2005, 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, 2004, there were no borrowings under either of
the credit facilities.
We have entered into security agreements with certain financial institutions 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 $70.0 million collateralized by inventory purchases financed by the financial
institutions. At December 31, 2004 and 2003, we owed the financial institutions approximately $29.3 million
and $19.6 million, respectively, which is included in trade accounts payable.
Pursuant to share repurchase programs authorized by our Board of Directors, we purchased 1,352,300
shares of our common stock in 2004 at a total cost of $86.0 million (an average price of $63.60 per share) and
1,852,424 shares of our common stock in 2003 at a total cost of $76.3 million (an average price of $41.20 per
share). We have authority under a repurchase program authorized in July 2004 to repurchase up to 3,786,900
additional shares. These purchases may be made from time to time in both open market and private
transactions, as conditions warrant. This repurchase program is expected to remain in effect through July 2006,
unless earlier terminated by the Board or completed. Repurchased shares are held in treasury pending use for
general corporate purposes, including issuances under various employee stock plans.
On May 20, 2004, our Board of Directors declared an annual cash dividend to shareholders. This dividend
of $0.36 per share, totaling $30.0 million, was paid on June 30, 2004, to shareholders of record on June 16,
2004. We paid a dividend of $0.30 per share, totaling $24.9 million, on September 26, 2003. In future years,
we plan to announce any dividend following the annual shareholders meeting, typically held in May. The
timing and amount of any future dividends will depend upon the earnings, cash requirements and financial
condition of the Company and other factors deemed relevant by our Board of Directors.
We currently have one distribution center, located with our corporate headquarters, in Vernon Hills,
Illinois. The capacity of this distribution center should be sufficient to handle our expected growth in sales and
shipments at least through 2005, based on current projections. We will continue to make investments in this
distribution center to further automate the facility and increase its efficiency. In February 2005, we signed a
lease for a new distribution center to be constructed in North Las Vegas, Nevada, to support the Company’s
projected growth beyond 2005. We expect the new facility to be completed and operational by the end of 2005.
Capital expenditures for machinery, equipment and leasehold improvements related to this second distribution
center are anticipated to be approximately $30 to $40 million in 2005 and will cause capital expenditures in
2005 to be significantly higher than recent years. However, we believe that our internally generated cash flow
will be sufficient to cover these capital expenditures. In addition, we expect to incur approximately $5 to $6
million of operating and start-up costs related to this facility, primarily in the third and fourth quarters of 2005.
Our current and anticipated uses of our cash, cash equivalents and marketable securities are to fund growth
in working capital and capital expenditures necessary to support future growth in sales, our stock buyback
program, potential dividends and possible expansion through acquisitions. We believe that the funds held in
cash, cash equivalents and marketable securities, and funds available under the credit facilities, will be
sufficient to fund our working capital and cash requirements for the foreseeable future.
Cash Flows
Net cash provided by operating activities in 2004 was $184.2 million compared to $125.4 million in 2003.
The primary factors that affected our cash flow from operations were net income, accounts receivable, and
accounts payable. Accounts receivable increased from $444.0 million at December 31, 2003 to $580.0 million
at December 31, 2004. The increase in accounts receivable was primarily due to an increase in sales and a
larger portion of business being done on terms rather than on credit cards. Accounts payable increased to