CDW 2004 Annual Report Download - page 59

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Repurchased shares are held in treasury pending use for general corporate purposes, including issuances
under various employee stock plans.
17. Public Offering of Common Shares
In March 2002, Gregory C. Zeman, former director and vice chairman of the Company, sold a total of
2,000,000 shares of common stock at a price of $48.00 per share. We did not receive any proceeds from
the sale of shares and the number of outstanding common shares was not impacted. The shares sold by Mr.
Zeman were acquired from Michael P. Krasny, the chairman emeritus, principal shareholder and a director
of the Company, through the exercise of options previously granted to Mr. Zeman pursuant to the MPK
Stock Option Plan. The exercise of options by Mr. Zeman resulted in the realization by the Company of an
income tax benefit of approximately $37.9 million in 2002, of which approximately $0.4 million had been
previously recorded to deferred taxes. We recorded the incremental tax benefit of $37.5 million as an
increase to paid-in capital. In addition, we recorded incremental payroll tax expense related to the option
exercise of approximately $1.4 million, which reduced diluted earnings per share in 2002 by approximately
$0.01 per share.
In May 2003, Mr. Zeman and Daniel B. Kass, former director and executive vice president of the
Company, sold a total of 1,108,864 shares of common stock. We did not receive any proceeds from the
sale of shares and the number of outstanding common shares was not impacted. The shares sold by Mr.
Zeman and Mr. Kass were acquired from Mr. Krasny through the exercise of options previously granted to
them pursuant to the MPK Stock Option Plan. The exercise of options by Mr. Zeman and Mr. Kass
resulted in the realization by the Company of an income tax benefit of approximately $17.7 million in
2003, of which approximately $0.3 million had been previously recorded to deferred taxes. We recorded
the incremental tax benefit of $17.4 million as an increase to paid-in capital. In addition, we recorded
incremental payroll tax expense related to the option exercise of approximately $0.7 million, which
reduced diluted earnings per share in 2003 by less than $0.01 per share.
18. Micro Warehouse Transactions
During September 2003, we purchased selected U.S. assets and the Canadian operations of Micro
Warehouse, a reseller of computers, software and peripheral products. The U.S. transaction, completed on
September 9, 2003, was accounted for as a purchase of assets, with the $20.0 million purchase price
allocated to the assets purchased, including inventory, fixed assets and customer lists, based upon their fair
values at the date of purchase. Subsequent to the completion of the U.S. transaction, sales made by former
members of the Micro Warehouse U.S. sales force who joined CDW in conjunction with this transaction,
along with the associated costs, are included in the accompanying consolidated financial statements. The
Canadian transaction, completed on September 23, 2003, was accounted for as the purchase of a business
and, accordingly, the results of operations of the acquired business subsequent to the date of purchase are
included in the accompanying consolidated financial statements, and the assumed assets and liabilities were
recorded based upon their fair values at the date of purchase. The Canadian operations were purchased for
$2.7 million.
During the year ended December 31, 2003, we recorded $22.3 million of transaction and integration expenses
associated with these transactions. These expenses were primarily comprised of severance and outplacement
costs, payroll expenses for former Micro Warehouse employees performing transition services, customer
satisfaction expenses, customer communications and advertising expenses, legal and accounting advisory fees
and a reserve established for the equipment in a Wilmington, Ohio distribution center leased by Micro
Warehouse as discussed below. These expenses are included in cost of sales ($0.3 million), selling and
administrative expenses ($20.2 million), net advertising expenses ($1.5 million) and other expense ($0.3
million) in the Consolidated Statements of Income in 2003.
During the year ended December 31, 2004, we recorded $3.9 million of transaction and integration expenses
associated with these transactions. These expenses were primarily comprised of payroll expenses for former
Micro Warehouse employees performing transition services, legal fees and an adjustment to the reserve