<PAGE> 1
FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION STATEMENT NO. 333-21523
AND REGISTRATION STATEMENT NO. 333-20923
PROSPECTUS
632,064 SHARES
CDW COMPUTER CENTERS, INC.
CDW LOGO COMMON STOCK CDW LOGO
Of the 632,064 shares of Common Stock offered hereby, 500,000 are being sold
by certain officers (the "Management Selling Shareholders") of CDW Computer
Centers, Inc. (the "Company") and 132,064 shares are being sold by certain other
employees of the Company (the "MPK Plan Selling Shareholders"). The Management
Selling Shareholders and the MPK Plan Selling Shareholders are collectively
referred to herein as the "Selling Shareholders." See "Principal and Selling
Shareholders" and "Description of the MPK Restricted Stock Plan Modification."
The Company will not receive any of the proceeds from the sale of shares offered
by the Selling Shareholders.
The Company's Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market under the symbol CDWC. On February 20,
1997, the closing sale price of the Common Stock as reported by Nasdaq was
$59.75 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNT TO PROCEEDS TO PROCEEDS TO
PRICE TO MANAGEMENT SELLING MANAGEMENT SELLING MPK PLAN SELLING
PUBLIC SHAREHOLDERS(1) SHAREHOLDERS(2) SHAREHOLDERS(2)(3)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............. $59.00 $2.56 $56.44 $59.00
Total(4)............... $37,291,776 $1,280,000 $28,220,000 $7,791,776
==================================================================================================================
</TABLE>
(1) The Company and the Management Selling Shareholders have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Management Selling Shareholders
estimated at $100,000. The Management Selling Shareholders have agreed to
pay any expenses attributable to the MPK Plan Selling Shareholders in this
offering.
(3) In order to facilitate an orderly distribution of the MPK Restricted Stock
Plan shares to be distributed to the MPK Plan Selling Shareholders pursuant
to the Company's Registration Statement on Form S-3 (No. 333-20935) declared
effective February 7, 1997, the Underwriters have agreed to underwrite such
shares as part of this offering without charge to the MPK Plan Selling
Shareholders.
(4) The Management Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to an additional 50,000 shares of Common Stock
solely to cover over-allotments, if any. See "Underwriting." If all such
shares are purchased, the total Price to Public, Underwriting Discount to
Management Selling Shareholders, and Proceeds to Management Selling
Shareholders will be $40,241,776, $1,408,000, and $31,042,000, respectively.
The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by them and subject to their right to
reject orders in whole or in part and certain other conditions. It is expected
that delivery of the certificates for the shares of Common Stock will be made on
or about February 26, 1997.
WILLIAM BLAIR & COMPANY
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
THE DATE OF THIS PROSPECTUS IS FEBRUARY 21, 1997
<PAGE> 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are incorporated herein by reference: (1)
the Company's Annual Report on Form 10-K for the year ended December 31, 1996;
(2) the Company's Notice of Annual Meeting of Shareholders and Proxy Statement
dated March 26, 1996; and (3) the description of the Company's capital stock
contained in the Company's Registration Statement on Form 8-A filed May 19, 1993
registering the Company's Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering of the Common Stock registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing such documents. Any statements contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered, upon a written or oral
request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to Investor
Relations, 1020 East Lake Cook Road, Buffalo Grove, Illinois 60089. Telephone
(847) 419-8243.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form S-3 under the Securities Act of 1933 with respect
to the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and exhibits and schedules
thereto, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and to the exhibits and schedules thereto. Copies of the Registration Statement
and the exhibits and schedules thereto may be inspected without charge at the
Commission's principal offices in Washington, D.C., and copies of all or any
part thereof may be obtained from such office upon payment of prescribed fees.
The Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov.
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copies made at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, IL
60661; and 7 World Trade Center, Suite 1300, New York, NY 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN COMMON STOCK OF THE COMPANY ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT
OF 1934. SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere or incorporated by reference in this Prospectus. Unless
otherwise indicated, all information in this Prospectus (i) reflects a
two-for-one stock split effected in the form of a stock dividend paid on May 6,
1994 pursuant to which each shareholder of record on April 20, 1994 received one
additional share of the Company's Common Stock for each share of Common Stock
owned as of that date, (ii) reflects a three-for-two stock split effected in the
form of a stock dividend paid on July 15, 1996 pursuant to which each
shareholder of record on July 5, 1996 received one additional share of the
Company's Common Stock for every two shares of Common Stock owned as of that
date (together with the 1994 two-for-one stock split, the "Stock Splits") and
(iii) assumes that the Underwriters' over-allotment option is not exercised. See
"Underwriting." This Prospectus, including information incorporated by
reference, contains forward-looking statements that involve certain risks and
uncertainties. Any statements contained herein which are not historical facts or
which contain the words expect, believe or anticipate, shall be deemed to be
forward-looking statements. Such forward-looking statements include, but are not
limited to, the Company's expectations regarding its future financial condition
and operating results, business and growth strategy, market conditions and
competitive environments. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, product demand, pricing, market
conditions, risks related to the Company's relocation to a new facility,
development of new products and advancement of technology by manufacturers,
acceptance of such new products and technologies by end-users, competition and
other matters as set forth under "Risk Factors" and elsewhere in this
Prospectus.
THE COMPANY
CDW Computer Centers, Inc. is a leading direct marketer of over 20,000
microcomputer products, primarily to business, government, educational,
institutional and home office users in the United States. The Company sells a
broad range of name-brand microcomputer products, including hardware and
peripherals, software, networking products and accessories through knowledgeable
telemarketing account executives. Sales of products which utilize, or are
compatible with, the Microsoft Windows 95/Windows/Windows NT/ MS-DOS operating
platform account for substantially all of the Company's net sales. The Company
offers popular brand name microcomputer products from Apple, AST Research,
Compaq, Canon, Epson, Hewlett-Packard, IBM, Intel, Lotus, Microsoft, NEC,
Novell, Toshiba and US Robotics, among others. The Company's high volume,
cost-efficient operation supported by its proprietary management information
systems, enables it to offer these products at discounted prices.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered by the Selling Shareholders.......... 632,064
Shares Outstanding Immediately After the Offering... 21,524,984(1)
Use of Proceeds..................................... The Company will not receive any
proceeds from the offering. See "Use of
Proceeds."
Nasdaq National Market Symbol....................... CDWC
</TABLE>
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(1) All of the shares being offered hereby presently are outstanding. Does not
include 4,110,260 shares of Common Stock reserved for issuance under
various incentive stock option plans established by the Company, of which
options for 1,196,728 shares (which includes options for 132,064 shares to
be granted pursuant to the modification to the MPK Restricted Stock Plan)
have been granted and are currently outstanding under such plans. See
"Description of the MPK Restricted Stock Plan Modification."
-------------------------
The Company was originally incorporated under the laws of the State of
Illinois in June, 1984, reincorporated under the laws of the State of Delaware
in May, 1993 and reincorporated under the laws of the State of Illinois in June,
1995. The Company's executive offices and distribution facility are located at
1020 East Lake Cook Road, Buffalo Grove, Illinois 60089 and its telephone number
is (847) 465-6000. The Company's Internet address is http://www.cdw.com. The
Company's website is not, and shall not be deemed to be, a part of this
Prospectus.
3
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SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED TWELVE MONTHS ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------------------------
1992 1992(1) 1993 1994 1995 1996
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................... $138,769 $181,167 $270,919 $413,270 $628,721 $927,895
Cost of sales.................................. 121,163 158,412 236,718 359,274 548,568 805,413
-------- -------- -------- -------- -------- --------
Gross profit................................... 17,606 22,755 34,201 53,996 80,153 122,482
Selling and administrative expenses(2)......... 21,844 25,289 21,828 34,617 49,175 64,879
Exit charge(3)................................. -- -- -- -- -- 4,000
Special incentive compensation expense......... 9,281 9,281 -- -- -- --
-------- -------- -------- -------- -------- --------
Income (loss) from operations.................. (13,519) (11,815) 12,373 19,379 30,978 53,603
Other income (expense), net.................... (113) (168) (297) 511 2,020 3,281
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes.............. (13,632) (11,983) 12,076 19,890 32,998 56,884
Income tax provision (benefit)................. (16) 5 3,294 7,777 12,939 22,484
Benefit from change in tax status(4)........... -- -- (3,807) -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss).............................. $(13,616) $(11,988) $ 12,589 $ 12,113 $ 20,059 $ 34,400
======== ======== ======== ======== ======== ========
PRO FORMA INCOME DATA (UNAUDITED):
Income (loss) before income taxes.............. $(13,632) $(11,983) $ 12,076
Adjustment for executive and special incentive
compensation expense in excess of contractual
compensation(5).............................. 19,158 19,187 --
-------- -------- --------
Pro forma income before income taxes........... 5,526 7,204 12,076
Pro forma provision for income taxes(5)........ 2,155 2,809 4,725
(Benefit) from change in tax status(4)......... -- -- (3,807)
-------- -------- --------
Pro forma net income........................... $ 3,371 $ 4,395 $ 11,158
======== ======== ========
Net income per share (Pro forma for 1993
and 1992).................................... $ 0.18 $ 0.60 $ 0.61 $ 0.95 $ 1.58
======== ======== ======== ======== ========
Weighted average number of common and common
equivalent shares outstanding (Pro forma for
1993 and 1992)............................... 18,300 18,750 20,003 21,080 21,785
SELECTED OPERATING DATA:
Average order size............................. $ 617 $ 610 $ 587 $ 590 $ 630 $ 704
Number of orders shipped (in thousands)........ 225 297 462 700 998 1,318
Customers serviced (in thousands).............. 100 N/A 190 274 374 462
Net sales per employee (in thousands).......... $ 1,039 1,058 $ 1,188 $ 1,223 $ 1,364 $ 1,459
Inventory turnover............................. 29.8 28.4 29.7 22.2 21.7 23.4
Accounts receivable -- Days sales
outstanding.................................. 15.6 16.0 16.9 20.7 21.8 22.6
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Working capital (deficit)...................... $ (33) $ 16,462 $ 49,217 $ 99,127 $123,614
Total assets................................... 18,725 34,159 77,860 132,929 198,830
Total debt and capitalized lease obligations... 6,704 3,603 -- -- --
Total shareholders' equity (deficit)........... (1,030) 21,852 55,843 106,161 141,622
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</TABLE>
(1) The Company adopted a fiscal year ending December 31, for the nine months
ended December 31, 1992 and all subsequent periods. The data for the twelve
months ended December 31, 1992 is unaudited and presented for comparative
purposes.
(2) Selling and administrative expenses include executive compensation expense
for the majority shareholder and President, which is pursuant to employment
agreements that commenced as of the closing date of the Company's initial
public offering. The total executive compensation expense for the majority
shareholder and President for the twelve months ended December 31, 1992 and
the nine months ended December 31, 1992 was $10,281,000 and $10,158,000,
respectively.
(3) The exit charge provides for estimated costs associated with vacating the
Company's current leased facility. See "Risk Factors -- Facilities."
(4) Net income and pro forma net income for the twelve months ended December 31,
1993 includes a $3,807,000 ($0.20 per share) tax benefit relating to the
Company's change in tax status from an S corporation to a C corporation on
May 25, 1993 and adoption of Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes."
(5) The Company terminated its election to be treated as an S corporation
effective May 25, 1993. The pro forma income statement data has been
computed by adjusting the Company's net income (loss), as reported, to: (a)
eliminate for the nine and twelve months ended December 31, 1992 (i)
executive compensation expense (including bonuses) in excess of contractual
compensation pursuant to employment agreements, which commenced as of the
closing date of the initial public offering, for the majority shareholder
and the President and (ii) special incentive compensation expense pursuant
to the MPK Stock Option Plan; and (b) compute income taxes for the twelve
months ended December 31, 1993 and the nine months ended December 31, 1992
assuming an effective tax rate of 39% which would have been recorded had the
Company been a C corporation.
4
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RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating the Company, its business and the shares of Common Stock offered
hereby. This Prospectus, including information incorporated by reference,
contains forward-looking statements which involve certain risks and
uncertainties. Any statements contained herein which are not historical facts or
which contain the words expect, believe or anticipate, shall be deemed to be
forward looking statements. Such forward-looking statements include, but are not
limited to, the Company's expectations regarding its future financial condition
and operating results, business and growth strategy, market conditions and
competitive environment. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, product demand, pricing, market
conditions, risks related to the Company's relocation to a new facility,
development of new products and advancement of technology by manufacturers,
acceptance of such new products and technologies by end-users, competition and
other matters, as set forth in the following risk factors and elsewhere in this
Prospectus.
RAPID GROWTH
Since its formation in June, 1984, the Company has experienced rapid
growth. As part of its business strategy, the Company intends to pursue the
continuation of this growth through further development of marketing programs,
the hiring of additional account executives, technical support personnel and
operations personnel and investment in additional facilities and systems. The
Company's success will, in part, be dependent upon the ability of the Company to
manage its growth effectively. The Company's business and growth could be
affected by the spending patterns of existing or prospective customers, the
cyclical nature of capital expenditures of businesses, continued competition and
pricing pressures, the successful development of new products, and other trends
in the general economy. Recent statements by industry observers have indicated
that there may be a slowdown in the growth rate of the microcomputer industry.
As a result, future revenue and profit increases could occur at moderating
rates. There can be no assurance that the Company's rapid growth will continue
in the future.
FACILITIES
In the first quarter of 1996, the Company acquired a 27 acre parcel of land
in Vernon Hills, Illinois, near its present facility, upon which it presently is
constructing a combined warehouse, telemarketing, retail showroom and corporate
office facility. The initial phase of construction includes approximately
218,000 square feet. The Company expects to vacate its current leased facility
and relocate its operations to this new facility in the third quarter of 1997.
The Company will likely incur certain moving and other costs, not expected to
exceed $1.0 million, relating to this relocation which would be charged to
operating results in the period incurred. The Company recorded a $4.0 million
pre-tax non-recurring charge in the first quarter of 1996 for estimated costs
associated with vacating its current leased facility, including estimated lease
costs and costs to restore the facility to its original condition. The Company
calculated the exit charge based upon certain assumptions regarding its ability
to sublease the facility. There is no assurance that the $4.0 million charge
will be adequate to cover actual costs should the Company's actual experience in
subleasing the facility differ from its assumptions. Any additional costs would
adversely affect operating results at the time such costs are known.
In conjunction with the move to the new facility, the Company will acquire
and install certain new telephone and warehousing equipment. Any significant
unanticipated expense, capital cost or disruption of the Company's business or
operations caused by the construction of the new facility, relocation to the new
facility or implementation of new telephone and warehousing equipment could have
a material adverse effect on the Company's results of operations. If the Company
is unable to generate increased sales and gross profit sufficient to absorb
increased overhead and other costs associated with its expansion, the Company
would likely experience lower pre-tax margins.
Historically, the Company has operated, and upon relocation to its new
facility will continue to operate, its business from a single facility which is
a combined telemarketing, warehouse, corporate office and retail
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showroom facility. As a result, the Company's business could be adversely
affected by any interruption of the Company's business resulting from a natural
disaster or other event negatively impacting the facility.
MANAGEMENT INFORMATION SYSTEMS
The Company's success is dependent on the accuracy and proper utilization
of its management information systems, including its telephone system. The
Company's ability to manage its inventory and accounts receivable collections;
to purchase, sell and ship its products efficiently and on a timely basis; and
to maintain its cost-efficient operation is dependent upon the quality and
utilization of the information generated by its management information systems.
The Company recognizes the need to continually upgrade its management
information systems to most effectively manage its operations and customer data
base. In that regard, the Company anticipates that it will, from time to time,
require software and hardware upgrades for its present management information
systems. The Company believes that its management information systems, coupled
with these ongoing enhancements, are sufficient to sustain its present
operations and its anticipated growth for the foreseeable future. Any
interruption in the availability or use of the management information systems as
a result of system failure or otherwise could have a material adverse effect on
the Company's operations. The Company does not currently have a redundant or
back-up telephone system and any interruption in telephone service could have a
material adverse effect on the Company's operations.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's future performance will depend to a significant extent upon
the efforts and abilities of its senior management team, particularly those
executive officers who also serve as directors of the Company. Although the
Company has various programs in place to motivate, reward and retain its
management team, including annual incentive plans, restricted stock and stock
option plans, the loss of service of one or more of these persons could have an
adverse effect on the Company's business. Each of the Company's executive
officers who serves as a director is subject to an employment agreement with the
Company. The Company's success and plans for future growth will also depend on
its ability to hire, train and retain skilled personnel in all areas of its
business.
POTENTIAL QUARTERLY FLUCTUATIONS IN RESULTS AND VOLATILITY OF STOCK PRICE
The Company could experience variability in its net sales and net income on
a quarterly basis as a result of many factors, including the condition of the
personal computer industry in general, shifts in demand for hardware and
software products and the introduction of new products or upgrades. The
Company's operating results are also highly dependent upon its level of gross
profit as a percentage of net sales which fluctuates due to numerous factors
which may be outside of the Company's control. Such factors include the
availability of opportunistic purchases, changes in prices from suppliers,
rebate and incentive programs available from suppliers, general competitive
conditions, and the relative mix of products sold during the period.
The technology sector of the United States stock markets has experienced
substantial volatility in recent periods, and the market price of the Common
Stock has, likewise, experienced volatility during these periods. Numerous
conditions which impact the technology sector or the stock market in general or
the Company in particular, whether or not such events relate to or reflect upon
the Company's operating performance, could adversely affect the market price of
the Common Stock. Furthermore, fluctuations in the Company's operating results,
the loss of a significant vendor, increased competition, reduced vendor
incentives and trade credit, higher postage and operating expenses, and other
developments, could have a significant impact on the market price of the Common
Stock.
RELIANCE ON VENDORS AND PRODUCT LINES
The Company acquires products for resale both directly from manufacturers
and indirectly through distributors and other sources. The Company is generally
authorized by manufacturers to sell via direct marketing all or certain products
offered by the manufacturer. The Company's authorization with each manufacturer
provides for certain terms and conditions, which may include one or more of the
following: product
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<PAGE> 7
return privileges, price protection policies, purchase discounts and vendor
incentive programs, such as purchase rebates and cooperative advertising
reimbursements. Additionally, certain products are subject to manufacturer
allocation, which limits the number of units of such products available to
resellers, including the Company. The Company's business and results of
operations may be adversely affected if the terms and conditions of the
Company's authorizations were significantly modified or if certain products
become unavailable to the Company, whether such unavailability is because the
manufacturer terminates the Company's authorization or the product is subject to
allocation or otherwise. In addition, the relocation of key distributors
utilized in the Company's just-in-time purchasing model could adversely impact
the Company's results of operations.
For the year ended December 31, 1996, Toshiba America Incorporated and
Ingram Micro/Alliance were the only vendors from whom purchases exceeded 10% of
total purchases, accounting for 10.3% and 14.8%, respectively, of the Company's
total purchases. The loss of either of these vendors or any other key vendors
could have an adverse effect on the Company.
Vendors currently provide the Company with trade credit as well as
substantial incentives in the form of discounts, rebates, credits, and
cooperative advertising reimbursements. Cooperative advertising reimbursements,
which represent the largest proportion of vendor incentives, were 2.2% of net
sales for the year ended December 31, 1996. A reduction in, discontinuance of,
or significant delay in receiving trade credit or incentives could adversely
affect the Company's profitability and cash flow.
INVENTORY MANAGEMENT
Given the rapid technological changes that affect the market and pricing
for products sold by the Company, the Company seeks to minimize its inventory
exposure through a variety of inventory control procedures and policies,
including certain vendor programs. However, there can be no assurance that such
practices will continue or that unforeseen product developments will not
adversely impact the Company's operations. The Company periodically takes
advantage of cost savings associated with certain opportunistic bulk inventory
purchases. Such opportunistic bulk purchases could increase the Company's
exposure to inventory obsolescence. Additionally, if such opportunistic bulk
purchases are not available in the future, it could have a negative impact on
the Company's sales growth and gross profit. The Company maintained an
investment in product inventory of $41.5 million at December 31, 1996, of which
approximately $412,000 (1.13%) of product inventory on-hand was more than 90
days old. The Company's inventory turnover was 23.4 for the year ended December
31, 1996.
INDUSTRY EVOLUTION AND PRICE CHANGES
The microcomputer industry has evolved as a result of, among other things,
the development of new technologies which are translated by manufacturers into
new products and applications. The Company has been and will continue to be
dependent on the continued development of new technologies and products by its
vendors, as well as the acceptance of such technologies and new products by
end-users. A decrease in the rate of development of new technologies and new
products by manufacturers, or the lack of acceptance of such technologies and
products by end-users, could have a material adverse effect on the Company's
growth prospects and results of operations.
Additionally, the industry has become more accepting of large-volume,
cost-effective channels of distribution such as computer superstores, consumer
electronic and office supply superstores, national direct marketers and mass
merchants. In addition, several of the Company's competitors are attempting to
market computer products through electronic commerce, including the Internet.
While these efforts to date represent only a small percentage of industry-wide
sales, such sales may grow if end-user acceptance of electronic commerce
increases. Although the Company offers products for sale via electronic
commerce, there can be no assurance that the Company's sales via electronic
commerce will meet or exceed sales levels generated by competitors.
The current industry configuration may result in increased pricing
pressures. Decreasing prices of microcomputers and related products, resulting
in part from technological changes, may require the Company
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<PAGE> 8
to sell a greater number of products to achieve the same level of net sales and
gross profit. Such a trend may adversely affect the Company's business and
results of operations and could make it more difficult for the Company to
continue to increase its net sales and earnings growth. In addition, if the
growth rate of microcomputer sales were to slow down, the Company's operating
results could be adversely affected.
COMPETITION
The microcomputer products industry is highly competitive. The Company
competes with a large number and variety of resellers of microcomputer and
related products. In the hardware category, the Company competes with
traditional microcomputer retailers, computer superstores, consumer electronic
and office supply superstores, mass merchandisers, national direct marketers and
value-added resellers. In the software and accessories categories, the Company
generally competes with these same resellers as well as specialty retailers and
resellers. Certain national computer resellers also have established or acquired
their own direct marketing operations. In addition, as a result of improving
technology, certain software manufacturers have developed and may continue to
develop sales methods that allow customers to download software programs and
packages directly onto the customer's system through the use of modem
telecommunications. The Company also competes with distributors and
manufacturers that sell hardware and software directly to certain customers.
Several of the Company's current and potential competitors are larger and have
substantially greater resources than the Company. Additionally, several
competitors in the direct marketing industry have raised capital in the public
markets through initial and subsequent public offerings. The increased
visibility of these companies and their access to the capital markets may
improve their market position and their ability to compete with the Company. The
Company believes that competition may increase in the future, which could
require the Company to reduce prices, increase advertising expenditures or take
other actions which may have an adverse effect on the Company's operating
results.
SHIPPING, POSTAGE AND PAPER COSTS
Shipping, postage and paper costs are significant expenses in the operation
of the Company's business. The Company ships its products to customers generally
by United Parcel Service, Federal Express and other overnight delivery and
surface services. The Company generally invoices customers for shipping and
handling charges. There can be no assurance that future increases in the cost of
commercial delivery services can be passed on to the Company's customers, which
could have an adverse effect on the Company's operating results. Additionally,
strikes or other service interruptions by such shippers could adversely affect
the Company's ability to market or deliver product on a timely basis.
The Company incurs substantial paper and postage costs related to its
marketing activities. Although these costs are partially offset by cooperative
advertising rebates from vendors, any increases in postal or paper costs (paid
by the Company for its catalog production and mailings) could have an adverse
effect on the Company's operating results.
STATE SALES TAX COLLECTION
The Company presently collects retail occupation tax, commonly referred to
as sales tax, or other similar tax only on sales of products to non-exempt
residents of the State of Illinois. Various states have sought to impose on
direct marketers the burden of collecting state sales taxes on the sale of
products shipped to that state's residents. The United States Supreme Court has
ruled that the various states, absent Congressional legislation, may not impose
tax collection obligations on an out-of-state mail order company whose only
contacts with the taxing state are the distribution of catalogs and other
advertisement materials through the mail and whose subsequent delivery of
purchased goods is by U.S. mail or interstate common carriers. Although a 1995
New York state court case has imposed tax collection obligations on out-of-state
companies, one of which was a mail order company whose contacts with the other
state consisted of visiting the state several times a year to aid customers or
visiting stores stocking their goods, the Company believes its operations are
different from the operations of the companies in that case and thus do not give
rise to tax collection obligations. However, the Company cannot predict the
level of contact with any state which would give rise to future or past tax
collection obligations within the parameters of the Supreme Court case.
Additionally, within the first or second quarter of 1997, the Company
anticipates that certain legislation will be
8
<PAGE> 9
reintroduced in the United States Senate which, if passed, would impose state
sales tax collection obligations on out-of-state mail order companies such as
the Company, whose sales to residents of the taxing state exceed $100,000 per
year in the aggregate. The Company's sales to residents of all states currently
exceeds this level. If the bill is enacted, or the Company is deemed to have a
physical presence in one or more states, the imposition of a tax collection
obligation on the Company may result in additional administrative expenses to
the Company and price increases to the customer that could adversely affect the
Company.
LEGAL PROCEEDINGS
In June, 1993 following the Company's initial public offering, a former
officer, director and shareholder of the Company filed a complaint against the
Company and its Chairman and Chief Executive Officer, Michael P. Krasny,
alleging violations of the federal securities laws, fraud and breach of
fiduciary duty in connection with the 1990 purchase by the Company of the former
shareholder's 20% interest in the Company. The complaint was dismissed by the
district court on procedural grounds in June, 1996, and the former shareholder
subsequently filed an appeal. The Company and Mr. Krasny believe that the
purchase of the shares was conducted honestly and properly and that the suit by
the former shareholder is without merit. The Company and Mr. Krasny are
committed to vigorously defending the litigation. Mr. Krasny has agreed to
indemnify and reimburse the Company for all damages and expenses, net of tax
benefits received by the Company, related to this action. The applicable
accounting rules provide that certain amounts assumed by Mr. Krasny on behalf of
the Company be recorded by the Company for financial reporting purposes as an
expense and a related increase to paid-in capital, net of tax effects.
Accordingly, while having no impact on the Company's cash flow, any such
expenses incurred by Mr. Krasny on behalf of the Company, including litigation,
settlement or judgment costs, would negatively impact the Company's results of
operations in the period incurred. If this action goes to trial, the expenses
attributable thereto are expected to increase significantly which, although
reimbursed by Mr. Krasny, will result in a decrease in the Company's reported
results of operations. Should a negative result occur in this action, Mr. Krasny
could be required to transfer certain of his shares of Common Stock to such
former shareholder or determine to sell certain of his shares to finance such
amounts. Such a transfer or sale by Mr. Krasny could adversely impact the market
price of the Common Stock.
CONTROL BY INSIDERS
Upon the completion of the offering, Michael P. Krasny and certain trusts
and entities controlled by Mr. Krasny and created for the benefit of Mr.
Krasny's family and certain employees will possess up to 56.6% of the total
combined voting power of the Company's outstanding stock. Accordingly, Mr.
Krasny will be able to determine the outcome of all corporate decisions, effect
all corporate transactions (including mergers, consolidations and the sale of
all or substantially all of the Company's assets), or prevent or cause a change
in control in the Company without the consent of the other holders of the Common
Stock. In addition, Mr. Krasny may be able to cause the Company to file a
registration statement enabling him to sell additional shares in the public
market.
However, in order to maintain and motivate the Company's workforce, in 1993
Mr. Krasny granted out of his personal holdings restricted stock and options to
acquire Common Stock to certain employees, the effect of which could be to
reduce, over time, the total voting power possessed by Mr. Krasny. After giving
effect to the exercise of all of the options issued by, and the vesting of the
restricted stock granted by, Mr. Krasny under the MPK Stock Option Plan and MPK
Restricted Stock Plan, respectively, and assuming that no additional shares of
Common Stock are issued by the Company, Mr. Krasny will own up to approximately
39.7% of the issued and outstanding shares of Common Stock. In addition, the
Company has adopted stock option plans pursuant to which it is authorized to
issue up to 4,110,260 shares of its Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE AND ISSUANCE OF ADDITIONAL SHARES
There will be 21,524,984 shares of Common Stock outstanding after
completion of this offering, of which 12,230,436 shares are "restricted shares"
for purposes of the Securities Act of 1933, as amended (the "Securities Act").
All of the restricted shares are currently eligible for sale into the market,
subject to the limitations set forth in Rule 144 promulgated under the
Securities Act and the terms of the MPK Restricted
9
<PAGE> 10
Stock Plan and the MPK Stock Option Plan. Sales of a substantial number of
shares of Common Stock in the public market, whether by purchasers in the
offering or other shareholders of the Company, could adversely affect the
prevailing market price of the Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities. In
addition, the issuance of additional shares of stock by the Company could result
in the dilution of voting power of the shares of Common Stock purchased in the
offering.
10
<PAGE> 11
THE COMPANY
CDW Computer Centers, Inc. is a leading direct marketer of over 20,000
microcomputer products, primarily to business, government, educational,
institutional and home office users in the United States. The Company sells a
broad range of name-brand microcomputer products, including hardware and
peripherals, software, networking products and accessories through knowledgeable
telemarketing account executives. Sales of products which utilize, or are
compatible with, the Microsoft Windows 95/Windows/Windows NT/MS-DOS operating
platform account for substantially all of the Company's net sales. The Company
offers popular brand name microcomputer products from Apple, AST Research,
Compaq, Canon, Epson, Hewlett-Packard, IBM, Intel, Lotus, Microsoft, NEC,
Novell, Toshiba and US Robotics, among others. The Company's high volume,
cost-efficient operation supported by its proprietary management information
systems, enables it to offer these products at discounted prices.
The Company directs its marketing efforts toward current and prospective
customers with a particular focus on business, government, educational,
institutional and home office users. The Company believes that these entities
and persons have a high level of product knowledge and are most likely to
purchase sophisticated systems and products through its direct marketing format.
The Company efficiently markets to prospective customers through its catalog
mailing programs and through national advertising in computer magazines. The
Company's use of database management techniques to better qualify potential
customers and develop productive mailing strategies has enabled the Company to
increase its prospecting on a cost-effective basis. During the year ended
December 31, 1996, the Company serviced approximately 462,000 customers. The
Company continues to focus on generating repeat sales from existing customers
while attracting sales from new customers. The Company has consistently
maintained a high annual rate of repeat purchases from current customers by
offering excellent customer service and competitive pricing on a broad range of
microcomputer products. The Company enhances repeat purchases by offering add-on
and replacement products through its experienced telemarketing account
executives who are knowledgeable about a customer's needs, and by enhancing
product offerings such as networking products through targeted catalogs to such
users.
The Company has experienced significant growth in its business with net
sales growing to $927.9 million for the year ended December 31, 1996, a compound
annual growth rate of 50.4% for the four year period then ended. Net income
increased to $34.4 million representing a compound annual growth rate of 67.3%
for the four year period. In addition, its operating margin increased from 4.1%,
on a pro forma basis, in 1992 to 5.8% in 1996, reflecting the Company's low cost
operating model, high inventory turnover, generally exceeding 20 turns per year,
and cost-effective marketing programs.
To accommodate its anticipated future growth, the Company purchased 27
acres of vacant land and is constructing a 218,000 square foot combined
warehouse, telemarketing, retail showroom and corporate office facility in
Vernon Hills, Illinois. The Company intends to relocate to this facility in the
third quarter of 1997 and in the first quarter of 1996, recorded a non-recurring
pre-tax charge of $4.0 million to cover the estimated costs of exiting the
Company's current leased facility. The Company believes that the new facility
and available contiguous land will be sufficient to meet its needs for the
foreseeable future.
The Company's goal is to enhance its position as a leading direct marketer
of brand name microcomputer hardware and peripherals, software, networking
products and accessories in the U.S. The Company's strategy is to maintain a low
cost operating model by employing its product knowledgeable telemarketing
account executives, its expertise in product purchasing and pricing, its direct
marketing and database marketing skills, its proprietary management information
systems and its emphasis on customer service and technical support which
provides its customers value in the form of quality products at discounted
prices, with same-day shipping and after-sale technical support. The Company
believes that this strategy, coupled with technological advancement, new product
introductions and the growth of the market for microcomputer products, has
accounted for its success to date.
11
<PAGE> 12
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby. See "Principal and Selling Shareholders."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The following table sets forth the high and low sales prices for the
Company's Common Stock (as adjusted for the Stock Splits) for the periods
indicated as reported by the Nasdaq National Market. Trading began in the
Company's Common Stock on May 27, 1993. As of December 31, 1996, the Company
believes that there were approximately 2,700 beneficial owners of Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE
------------------
QUARTER ENDED HIGH LOW
------------- ---- ---
<S> <C> <C>
March 31, 1995............................................. $26 5/32 $20 1/3
June 30, 1995.............................................. 36 5/32 22 1/2
September 30, 1995......................................... 42 1/3 32 53/64
December 31, 1995.......................................... 38 1/3 24 53/64
March 31, 1996............................................. 39 5/3 22 1/2
June 30, 1996.............................................. 59 32 53/64
September 30, 1996......................................... 74 35
December 31, 1996.......................................... 72 1/4 59 1/4
March 31, 1997 (through February 20, 1997)................. 70 52
</TABLE>
The last reported sale price of the Company's Common Stock on February 20,
1997 was $59.75 per share.
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends on Common Stock in the foreseeable future. The
payment of cash dividends on shares of Common Stock will depend upon the
earnings of the Company, the Company's capital requirements and other financial
factors which are considered relevant by the Company's Board of Directors.
12
<PAGE> 13
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996 and the number
of shares offered pursuant to this Prospectus by (i) each person or group that
is known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each of the directors of the Company,
(iii) each of the Named Officers, (iv) all Selling Shareholders and (v) all
directors and officers of the Company as a group. All information with respect
to beneficial ownership has been furnished by the respective shareholders to the
Company.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- NUMBER OF -----------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES PERCENT OFFERED(1) SHARES PERCENT
---- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Michael P. Krasny(2)................. 12,808,857 59.5% 363,563(3) 12,176,793(4) 56.6%(4)
1020 East Lake Cook Road
Buffalo Grove, IL 60089
Gregory C. Zeman(5).................. 2,536,703 11.8 103,504 2,433,199 11.3
1020 East Lake Cook Road
Buffalo Grove, IL 60089
Daniel B. Kass(6).................... 538,089 2.5 21,955 516,134 2.4
Mary C. Gerlits(7)................... 269,046 1.2 10,978 258,068 1.2
Paul A. Kozak(8)..................... 6,401 * 6,251 150 *
Harry J. Harczak, Jr. ............... 750 * -- 750 *
Joseph Levy, Jr. .................... 25,500 * -- 25,500 *
Michelle L. Collins.................. -- -- -- -- --
All officers and directors as a
group (11 persons).............. 12,837,057(9) 59.6 512,160 12,204,993(9) 56.7
MPK PLAN SELLING SHAREHOLDERS(10)
Sylvia Alantzas.................... 14 * 14 -- --
Charlene Alvarez................... 227 * 227 -- --
John Arata......................... 2,508 * 2,508 -- --
Tim Austin......................... 1,718 * 1,718 -- --
Louis A. Baigorria................. 230 * 5 225 *
Long Barnes........................ 371 * 71 300 *
Diana Brakenbury................... 356 * 356 -- --
M. Brigid Burke.................... 645 * 645 -- --
Daniel F. Callen................... 5,909 * 5,909 -- --
Elmer Camposagrado................. 1,046 * 1,046 -- --
Fernando Chuw...................... 2,024 * 2,024 -- --
Loise Colson....................... 56 * 56 -- --
Patricia Comenduley................ 94 * 94 -- --
Carlton Connor..................... 1,304 * 1,304 -- --
Greg Cresta........................ 18,251 * 6,251 12,000 *
Dennis Dadas....................... 6,128 * 3,878 2,250 *
Linda Detweiler.................... 2,387 * 2,387 -- --
R. Michael Dubiel.................. 2,901 * 2,121 780 *
Doug Eckrote....................... 9,251 * 6,251 3,000 *
Mauro Figueroa..................... 466 * 466 -- --
Kenneth Z. Ford.................... 1,280 * 1,280 -- --
Marisa Foster...................... 926 * 926 -- --
Ivonne Franco...................... 101 * 101 -- --
Brian Fritz........................ 109 * 109 -- --
Donna Garner....................... 765 * 728 37 *
Brian Gilliam...................... 5,728 * 4,828 900 *
Juney Guaura....................... 117 * 117 -- --
Maurice Hamilton................... 6,251 * 6,251 -- --
Susan Handchetz.................... 81 * 81 -- --
Kathryn Hinton..................... 400 * 400 -- --
Jason Housinger.................... 2 * 2 -- --
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C> <C>
Maureen Isenberg............................ 1,725 * 1,725 -- --
Cheryl Jarm................................. 560 * 560 -- --
Nannette Jensen............................. 270 * 20 250 *
Jeffrey Jorgensen........................... 3,350 * 3,350 -- --
Laura Kelly................................. 644 * 644 -- --
Lawrence Kirsch............................. 6,251 * 6,251 -- --
Kimberly Krotky............................. 212 * 212 -- --
Mark Kuffel................................. 241 * 241 -- --
Frank Lamascese............................. 461 * 92 369 *
Craig Langer................................ 149 * 149 -- --
Tammy Ley................................... 1,385 * 1,385 -- --
Kenny Lin................................... 264 * 264 -- --
Ann Lyp..................................... 1,138 * 1,138 -- --
Byron Moncayo............................... 4,937 * 4,837 100 *
Cynthia Moyes............................... 98 * 98 -- --
Cathleen Naslund............................ 3,941 * 3,941 -- --
Carl Nelson................................. 18 * 18 -- --
M. Angela Nickel............................ 691 * 691 -- --
Edwin Nieves................................ 806 * 806 -- --
Wendy Nikitenko............................. 2,396 * 2,396 -- --
Kathleen O'Sullivan......................... 2,147 * 2,147 -- --
Tirso Olivares.............................. 15 * 15 -- --
Diana Onofre................................ 73 * 73 -- --
Alan Pietrusiewicz.......................... 326 * 326 -- --
Erwin Piril................................. 271 * 271 -- --
Tina Rachuy................................. 1,174 * 1,174 -- --
Rick Roman.................................. 1,974 * 1,974 -- --
Cynthia Rospond............................. 2,111 * 1,961 150 *
Christina Rother............................ 1,300 * 950 350 *
Jay Rothschild.............................. 2,927 * 2,927 -- --
Lauren Rusk................................. 599 * 599 -- --
Kathleen Sacco.............................. 2,034 * 2,034 -- --
Joe Santander............................... 736 * 736 -- --
Enrique Santizo............................. 1,225 * 1,225 -- --
Brett Schmidt............................... 63 * 63 -- --
Andrew Schneeweis........................... 420 * 420 -- --
John Schorsch............................... 359 * 359 -- --
Tim Sheahen................................. 458 * 358 100 *
Mark Sheffer................................ 6,311 * 6,251 60 *
Daniel Sitowski............................. 1,658 * 1,658 -- --
David Solliday.............................. 240 * 173 67 *
Steven Staines.............................. 697 * 697 -- --
Kurt Swanson................................ 65 * 65 -- --
Elizabeth Tegtmeyer......................... 1,511 * 1,511 -- --
Bryan Testin................................ 4,976 * 4,376 600 *
Chi Ming Tong............................... 804 * 804 -- --
Donald Trunnell............................. 6,851 * 6,251 600 *
Jodi Uhler.................................. 1,916 * 1,916 -- --
Ricardo Vasquez............................. 2,900 * 2,600 300 *
Roderick Walker............................. 41 * 41 -- --
Alan Weiss.................................. 702 * 702 -- --
George White................................ 67 * 67 -- --
Neil Youngblood............................. 117 * 117 -- --
</TABLE>
- -------------------------
* Less than 1%
14
<PAGE> 15
(1) Unless otherwise indicated in the footnotes to this table, the Company
believes the individuals named in this table have sole voting and
investment power with respect to all shares of Common Stock reflected as
being owned by them. This information assumes that the underwriters'
over-allotment option is not exercised. If the over-allotment option is
exercised in full, 36,356, 10,350, 2,196 and 1,098 of the additional shares
will be sold by Messrs. Krasny, Zeman and Kass and Ms. Gerlits,
respectively.
(2) Includes 3,343,838 shares subject to the MPK Stock Option Plan, 554,736
shares, net of forfeitures resulting from employee terminations, subject to
the MPK Restricted Stock Plan, with respect to such shares Mr. Krasny
disclaims beneficial ownership, 8,560 shares owned by Mr. Krasny's minor
stepson and shares in certain trusts. Mr. Krasny is the Chairman, Chief
Executive Officer, Treasurer and Secretary of the Company.
(3) Includes shares which may be contributed by Mr. Krasny to a trust or
private foundation prior to the closing of this offering.
(4) Reflects the sale of an aggregate 136,437 shares issued pursuant to options
granted under the MPK Stock Option Plan out of Mr. Krasny's own shares
being sold by Messrs. Zeman and Kass and Ms. Gerlits and 132,064 shares
issued under the MPK Restricted Stock Plan out of Mr. Krasny's own shares
being sold by MPK Plan Selling Shareholders.
(5) Reflects 2,536,703 shares issuable pursuant to non-forfeitable options
granted by Mr. Krasny under the MPK Stock Option Plan effective December
31, 1992. The options are exercisable at the rate of 5% per year on each of
the first four anniversaries of the effective date and an additional 15% on
each anniversary date thereafter until all options are exercisable and are
fully exercisable in the event of Mr. Zeman's termination of employment.
These shares are also reported as being beneficially owned by Mr. Krasny.
Pursuant to the MPK Stock Option Plan, options to acquire an aggregate
103,504 shares have become exercisable by Mr. Zeman, all of which shares
are being sold by Mr. Zeman in this offering. Mr. Zeman is the President
and a director of the Company.
(6) Reflects 538,089 shares issuable pursuant to options granted by Mr. Krasny
under the MPK Stock Option Plan effective December 31, 1992. The options
are exercisable at the rate of 5% per year on each of the first four
anniversaries of the effective date and an additional 15% on each
anniversary date thereafter until all options are exercisable and are fully
exercisable in the event of Mr. Kass' termination of employment. These
shares are also reported as being beneficially owned by Mr. Krasny.
Pursuant to the MPK Stock Option Plan, options to acquire an aggregate
21,955 shares have become exercisable by Mr. Kass, all of which shares are
being sold by Mr. Kass in this offering. Mr. Kass is the Vice President --
Sales and a director of the Company.
(7) Reflects 269,046 shares issuable pursuant to options granted by Mr. Krasny
under the MPK Stock Option Plan effective December 31, 1992. The options
are exercisable at the rate of 5% per year on each of the first four
anniversaries of the effective date and an additional 15% on each
anniversary date thereafter until all options are exercisable and are fully
exercisable in the event of Ms. Gerlits' termination of employment. These
shares are also reported as being beneficially owned by Mr. Krasny.
Pursuant to the MPK Stock Option Plan, options to acquire an aggregate
10,978 shares have become exercisable by Ms. Gerlits, all of which shares
are being sold by Ms. Gerlits in this offering. Ms. Gerlits is the Vice
President -- Human Resources of the Company.
(8) Includes 6,251 shares issued pursuant to the MPK Restricted Stock Plan, as
modified, all of which shares are being sold by Mr. Kozak in this offering.
See "Description of MPK Restricted Stock Plan Modification." Mr. Kozak is
the Vice President -- Purchasing of the Company.
(9) For purposes of computing aggregate number of shares owned by directors and
officers of the Company as a group, shares of Common Stock beneficially
owned by more than one executive officer are counted only once.
(10) All shares being sold in this offering by such individuals represent shares
to be issued pursuant to the MPK Restricted Stock Plan, as modified. See
"Description of the MPK Restricted Stock Plan Modification."
15
<PAGE> 16
DESCRIPTION OF THE MPK RESTRICTED STOCK PLAN MODIFICATION
On January 31, 1997, the Company filed a Registration Statement on Form S-3
(No. 333-20935) in connection with a proposed modification (the "Modification")
to the MPK Restricted Stock Plan (the "Plan"), established in 1993 by Mr.
Krasny, the Company's Chairman and Chief Executive Officer, out of his own
Company shareholdings to reward certain of the Company's employees ("Plan
Participants") for past service on behalf of the Company. Pursuant to the
original terms of the Plan, each Plan Participant was entitled to receive a
designated number of shares of the Common Stock on January 1, 2000, assuming the
Plan Participants remained continuously employed by the Company until such date.
Plan Participants who failed to remain continuously employed until such date
(other than by reason of death or disability) forfeited their right to their
designated shares and such shares reverted to Mr. Krasny. The Modification was
proposed in order to permit Plan Participants to receive a portion of their Plan
shares prior to the original vesting date, while at the same time further
encouraging Plan Participants to remain in the employ of the Company after the
January 1, 2000 vesting date, and motivating the Plan Participants to exert
their best efforts toward the future performance of the Company.
Under the Modification, each Plan Participant was granted the right to
elect, in his/her sole and absolute discretion, to continue to be treated under
the original terms of the Plan or to adopt a modified vesting schedule for
his/her shares. The modified vesting schedule provides that any electing Plan
Participant would receive accelerated vesting for 25% of the shares allocated to
his/her account. The accelerated vesting date is intended to coincide with the
effective date of this Offering, thereby enabling the Plan Participants who
elected the Modification to sell in this Offering some or all of the shares they
received pursuant to the Modification. The vesting dates for the remaining 75%
of the shares for each Plan Participant who elected the Modification was
modified to vest in equal installments on January 1, 2000, 2001, 2002 and 2003.
Additionally, each Plan Participant who elected the Modification will
receive from the Company options to acquire the Company's Common Stock in an
amount equal to the number of shares received upon accelerated vesting. The
exercise price for these newly issued options will be the market price of the
Common Stock on the date immediately preceding the date the Plan shares are
distributed to the Plan Participants electing the Modification (which is
expected to coincide with the effective date of this Offering) and would vest in
equal installments on January 1, 2001, 2002, 2003 and 2004. These options will
be granted under the CDW 1996 Incentive Stock Option Plan, for which a
Registration Statement on Form S-8 will be filed by the Company prior to any
option exercise date.
All of the shares being offered hereby by the MPK Plan Selling Shareholders
represent shares to be received pursuant to accelerated vesting under the
Modification.
16
<PAGE> 17
UNDERWRITING
William Blair & Company, L.L.C., Montgomery Securities and Wessels, Arnold
& Henderson, L.L.C. (the "Underwriters") have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company, the Selling Shareholders and the Underwriters, to purchase from the
Selling Shareholders, the aggregate number of shares of Common Stock (excluding
the over-allotment shares) set forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
William Blair & Company, L.L.C. ............................ 316,032
Montgomery Securities....................................... 158,016
Wessels, Arnold & Henderson, L.L.C. ........................ 158,016
-------
Total............................................. 632,064
=======
</TABLE>
The nature of the Underwriters' obligations under the Underwriting
Agreement is such that all shares of the Common Stock offered hereby, excluding
shares covered by the over-allotment option granted to the Underwriters, must be
purchased if any are purchased. In the event of a default by any Underwriter,
the Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the nondefaulting Underwriters may be increased or such
Underwriting Agreement may be terminated.
The Underwriters have advised the Company and the Selling Shareholders that
they propose to offer the Common Stock directly to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession of not more than $1.40 per
share. Additionally, the Underwriters may allow, and such dealers may reallow, a
concession not in excess of $.10 per share to certain other dealers. After the
shares are released for sale to the public, the public offering price and other
selling terms may be changed by the Underwriters.
The Management Selling Shareholders have granted to the Underwriters an
option, exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 50,000 shares of Common Stock at the same price per
share to be paid by the Underwriters for the other shares offered hereby. The
Underwriters may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of the Common
Stock offered hereby.
The Company, the Management Selling Shareholders and the Company's
directors and executive officers have agreed, subject to certain gifting
exceptions, that they will not sell, offer to sell, issue, distribute or
otherwise dispose of any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock or register any shares of
Common Stock for sale under the Securities Act, for a period of 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part without the prior written consent of William Blair & Company, L.L.C.,
except that the Management Selling Shareholders may sell shares pursuant to the
over-allotment option.
One or more of the Underwriters currently act as market makers for the
Company's Common Stock and may engage in "passive market making" in such
securities on Nasdaq National Market in accordance with Rule 10b-6A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Rule 10b-6A
permits, upon the satisfaction of certain conditions, underwriters participating
in a distribution that are also Nasdaq market makers in the security being
distributed to engage in limited market making transactions during the period
when Rule 10b-6A under the Exchange Act would otherwise prohibit such activity.
Rule 10b-6A prohibits underwriters engaged in passive market making generally
from entering a bid or effecting a purchase at a price that exceeds the highest
bid for those securities displayed on the Nasdaq National Market by a market
maker that is not participating in the distribution. Under Rule 10b-6A each
underwriter engaged in passive market making is subject to a daily net purchase
limitation equal to 30% of such entity's average daily trading volume during the
two full consecutive calendar months immediately preceding the date of the
filing of the registration statement under the Securities Act pertaining to the
security to be distributed.
17
<PAGE> 18
The Company and the Management Selling Shareholders have agreed to
indemnify the Underwriters and their controlling persons against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof. Michelle
L. Collins, a director of the Company, is a principal of William Blair &
Company, L.L.C. ("William Blair"). William Blair from time to time provides and
in the past has provided investment banking services to the Company and is
serving as the lead manager in this offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company and the Selling Shareholders by Saitlin, Patzik, Frank &
Samotny Ltd., Chicago, Illinois. Certain legal matters relating to this offering
will be passed upon for the Underwriter by Winston & Strawn, Chicago, Illinois.
Winston & Strawn also acts as co-counsel to the Company and Mr. Krasny with
respect to the litigation described under the caption "Risk Factors -- Legal
Proceedings."
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 have been audited by Coopers & Lybrand L.L.P.
independent accountants, as set forth in their reports thereon included therein
and incorporated herein by reference. The consolidated financial statements and
financial statement schedule of the Company are incorporated by reference herein
in reliance upon the reports of such firm given the authority of such firm as
experts in accounting and auditing.
18
<PAGE> 19
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NO DEALER, SALES REPRESENTATIVE, OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................. 2
Additional Information.................. 2
Prospectus Summary...................... 3
Risk Factors............................ 5
The Company............................. 11
Use of Proceeds......................... 12
Price Range of Common Stock and Dividend
Policy................................ 12
Principal and Selling Shareholders...... 13
Description of the MPK Restricted Stock
Plan Modification..................... 16
Underwriting............................ 17
Legal Matters........................... 18
Experts................................. 18
</TABLE>
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632,064 SHARES
CDW LOGO
CDW COMPUTER CENTERS, INC.
COMMON STOCK
------------------------
PROSPECTUS
FEBRUARY 21, 1997
------------------------
WILLIAM BLAIR & COMPANY
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
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