<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1998
REGISTRATION NO. 333-
----------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CDW COMPUTER CENTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ILLINOIS 36-3310735
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
200 NORTH MILWAUKEE AVENUE 60061
VERNON HILLS, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
CDW INCENTIVE STOCK OPTION PLAN
CDW DIRECTOR STOCK OPTION PLAN
CDW 1996 INCENTIVE STOCK OPTION PLAN
CDW 1996 OFFICER AND MANAGER BONUS PLAN
(FULL TITLES OF THE PLANS)
MICHAEL P. KRASNY
CHIEF EXECUTIVE OFFICER
CDW COMPUTER CENTERS, INC.
200 NORTH MILWAUKEE AVENUE
VERNON HILLS, ILLINOIS 60061
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(847) 465-6000
(TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
ALAN B. PATZIK, ESQ.
STEVEN M. PREBISH, ESQ.
PATZIK, FRANK & SAMOTNY LTD.
150 SOUTH WACKER DRIVE, SUITE 900
CHICAGO, ILLINOIS 60606
(312) 551-8300
CALCULATION OF REGISTRATION FEE
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============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (3) REGISTRATION FEE (3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES OF COMMON STOCK,
$.01 PAR VALUE 4,059,377 shares $50.59 $198,596,703.39 $60,180.82
============================================================================================================================
</TABLE>
(1) REPRESENTS SHARES ISSUABLE UNDER THE CDW INCENTIVE STOCK OPTION PLAN, THE
CDW 1996 INCENTIVE STOCK OPTION PLAN, THE CDW DIRECTOR STOCK OPTION PLAN
AND THE CDW 1996 OFFICER AND MANAGER BONUS PLAN (COLLECTIVELY, THE
"PLANS"). PURSUANT TO RULE 416 UNDER THE SECURITIES ACT OF 1933, THERE
ARE REGISTERED HEREUNDER SUCH INDETERMINATE NUMBER OF ADDITIONAL SHARES
AS MAY BECOME ISSUABLE UNDER THE PLANS AS A RESULT OF THE ANTIDILUTION
PROVISIONS CONTAINED THEREIN.
(2) ESTIMATED SOLELY FOR THE PURPOSES OF CALCULATING THE REGISTRATION FEE
PURSUANT TO RULE 457(C) UNDER THE SECURITIES ACT OF 1933 ON THE BASIS OF
THE AVERAGE OF THE HIGH ($50.9375) AND LOW ($50.25) PRICES OF THE
REGISTRANT'S COMMON STOCK ON THE NASDAQ STOCK MARKET ON JANUARY 7, 1998.
(3) CALCULATED PURSUANT TO RULE 457(C) UNDER THE SECURITIES ACT OF 1933 (FOR
SHARES SUBJECT TO OPTIONS WHICH HAVE NOT YET BEEN GRANTED) AND PURSUANT
TO RULE 457(H)(1) UNDER THE SECURITIES ACT OF 1933 (FOR SHARES SUBJECT TO
PRESENTLY OUTSTANDING OPTIONS).
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.*
Item 2. Registrant Information and Employee Plan Annual Information.*
- --------------
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act of 1933, as amended (hereinafter, the
"Securities Act"), and the "Note" to Part I of Form S-8.
Pursuant to General Instruction C to Form S-8, included on the immediately
following pages is a "reoffer prospectus" for use by certain selling
shareholders in connection with the reoffer and resale of restricted
securities pursuant to the Plans.
<PAGE> 3
125,019 SHARES
CDW COMPUTER CENTERS, INC.
[CDW LOGO] COMMON STOCK [CDW LOGO]
This Prospectus (which is in the nature of a reoffer prospectus) relates to
up to 125,019 shares of Common Stock ("Common Stock" or the "Shares") of CDW
Computer Centers, Inc., an Illinois corporation (the "Company"), which may be
offered and sold from time to time by and for the account of the shareholders
(the "Selling Shareholders") identified in this Prospectus under the heading
"Selling Shareholders". The Shares being offered and sold hereunder will be
owned by persons who are or may be deemed to be "affiliates" of the Company
within the meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act"). All of the Shares to be sold hereunder have been registered
for resale on a Form S-8 filed by the Company on January 8, 1998 and will be
received by the Selling Shareholders upon exercise of options granted to them
under the CDW Incentive Stock Option Plan, the CDW 1996 Incentive Stock Option
Plan, the CDW Director Stock Option Plan and the CDW 1996 Officer and Manager
Bonus Plan (collectively, the "Plans"). The Company will not receive any of the
proceeds of such sales by the Selling Shareholders.
The sale of the Shares by the Selling Shareholders may be effected from
time to time in one or more transactions (which may include block transactions,
ordinary brokered transactions and solicited transactions) on the Nasdaq
National Market, in negotiated transactions or otherwise at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or negotiated prices. Brokers and dealers engaged by the Selling
Shareholders may receive commissions or discounts from the Selling Shareholders.
The Selling Shareholders and such brokers and dealers may be deemed
"underwriters" within the meaning of the Securities Act, in connection with such
sales.
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 January 7, 1998,
the closing sale price of the Common Stock as reported by Nasdaq was $50.50 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.
THE DATE OF THIS PROSPECTUS IS JANUARY 8, 1998
<PAGE> 4
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 Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997; (3) the Company's Notice of
Annual Meeting of Shareholders and Proxy Statement dated April 10, 1997; and (4)
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, 200 North Milwaukee Avenue,
Vernon Hills, Illinois 60061. Telephone (847) 419-8243. The Company's Internet
address is http://www.cdw.com.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form S-8 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.
2
<PAGE> 5
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. 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,
development of new products and advancement of technology by manufacturers,
acceptance of such new products and technologies by end-users, the availability
of quality personnel in the labor force, 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 25,000
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 3Com, 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
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Shares Offered by the Selling Shareholders.......... 125,019
Shares Outstanding Immediately After the Offering... 21,650,003(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) None of the shares being offered hereby presently are outstanding but are
reserved for issuance under the following incentive plans established by
the Company: (i) CDW Incentive Stock Option Plan, (ii) CDW 1996 Incentive
Stock Option Plan, (iii) CDW Director Stock Option Plan; and (iv) CDW 1996
Officer and Manager Bonus Plan. This figure does not include 3,984,358
additional shares of Common Stock reserved for issuance under these and
other incentive stock option plans established by the Company.
-------------------------
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
200 North Milwaukee Avenue, Vernon Hills, Illinois 60061 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>
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NINE MONTHS NINE MONTHS NINE MONTHS
ENDED TWELVE MONTHS ENDED DECEMBER 31, ENDED ENDED
DECEMBER 31, ------------------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1992(1) 1993 1994 1995 1996 1996(1) 1997(1)
------------ ----------- -------- -------- -------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
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INCOME STATEMENT DATA:
Net sales................ $138,769 $181,167 $270,919 $413,270 $628,721 $927,895 $665,722 $926,223
Cost of sales............ 121,163 158,412 236,718 359,274 548,568 805,413 577,873 801,643
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit............. 17,606 22,755 34,201 53,996 80,153 122,482 87,849 124,580
Selling and
administrative
expenses(2).............. 21,844 25,289 21,828 34,617 49,175 64,879 47,213 66,181
Exit Charge(3)........... -- -- -- -- -- 4,000 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 36,636 58,399
Other income (expense),
net...................... (113) (168) (297) 511 2,020 3,281 2,427 3,009
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes............. (13,632) (11,983) 12,076 19,890 32,998 56,884 39,063 61,408
Income tax provision
(benefit)................ (16) 5 3,294 7,777 12,939 22,484 15,356 24,348
Benefit from change in
tax status(4)............ -- -- (3,807) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........ $(13,616) $(11,988) $ 12,589 $ 12,113 $ 20,059 $ 34,400 $ 23,707 $ 37,060
======== ======== ======== ======== ======== ======== ======== ========
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 $ 1.09 $ 1.71
======== ======== ======== ======== ======== ======== ========
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 21,763 21,703
SELECTED OPERATING DATA:
Average order size....... $ 617 $ 610 $ 587 $ 590 $ 630 $ 704 $ 705 $ 707
Number of orders shipped
(in thousands)........... 225 297 462 700 998 1,318 944 1,310
Customers serviced (in
thousands)............... 100 N/A 190 274 374 462 358 443
Net sales per employee
(in thousands)........... $ 1,039 $ 1,058 $ 1,188 $ 1,223 $ 1,364 $ 1,459 $ 1,453 $ 1,461
Inventory turnover....... 29.8 28.4 29.7 22.2 21.7 23.4 21.0 20.4
Accounts
receivable -- days sales
outstanding.............. 15.6 16.0 16.9 20.7 21.8 22.6 22.4 25.1
<CAPTION>
DECEMBER 31,
------------------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997
----------- -------- -------- -------- -------- ------------- -------------
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FINANCIAL POSITION:
Working capital
(deficit)................ $ (33) $ 16,462 $ 49,217 $ 99,127 $123,614 $116,353 $153,291
Total assets............. 18,725 34,159 77,860 132,929 198,830 185,933 252,301
Total debt and
capitalized lease
obligations.............. 6,704 3,603 -- -- -- -- --
Total shareholders'
equity (deficit)......... (1,030) 21,852 55,843 106,161 141,622 130,162 184,982
</TABLE>
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(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 and for the nine months ended September 30,
1996 and 1997 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, May 25, 1993. 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) Exit charge relates to a $4,000,000 pre-tax non-recurring charge for
estimated costs to vacate the Buffalo Grove leased facility. The Company
vacated the Buffalo Grove, Illinois leased facility and moved to its new
facility in Vernon Hills, Illinois in the third quarter of 1997.
(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, development of new products and advancement of technology by
manufacturers, acceptance of such new products and technologies by end-users,
availability of quality personnel in the labor force, 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 managers, 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.
FACILITY
In June 1996 the Company purchased approximately 27 acres of vacant land in
Vernon Hills, Illinois, upon which it constructed a combined telemarketing,
warehouse, showroom and corporate office facility. Construction of the Vernon
Hills facility was completed in July 1997, at which time the Company relocated
to the new facility and vacated its Buffalo Grove facility. The Company recorded
a $4.0 million pre-tax non-recurring charge to operating results for exit costs
relating to the Buffalo Grove facility in the first quarter of 1996. The exit
costs consist primarily of the estimated cost to the Company of subleasing the
vacated facility, including holding costs, the estimated costs of restoring the
building to its original condition and certain asset write-offs resulting from
the relocation. The Company currently is attempting to sublease the Buffalo
Grove 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 the assumptions used in calculating the exit
charge. As a result of the move, the Company incurred moving costs of
approximately $300,000 of which $200,000 were charged to operating results in
the second quarter and $100,000 in the third quarter of 1997.
Historically, the Company has operated, and is likely to continue to
operate, its business from a single facility which is a combined telemarketing,
warehouse, corporate office and retail 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 AND YEAR 2000
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
5
<PAGE> 8
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.
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
During a recent Year 2000 ("Y2K") assessment, the Company identified a
manageable amount of legacy software that requires modification with the
remainder already compliant. Based on this assessment, the Company has
determined that it will not be required to modify or replace significant
portions of its software to make the systems perform properly after December 31,
1999. However, there can be no guarantee that the systems of other companies on
which the Company's systems rely will be converted timely, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
The Company will utilize both internal and external resources to reprogram
and test its internal software for Y2K compliance. The Company plans to complete
the Y2K project by December 31, 1998. To date, the expenses of the Y2K project
have not had a material effect on the results of operations. Moreover, the
remaining expenses, which will be incurred through December 31, 1998, are not
expected to have a material effect on the results of operations.
The costs of the project and the date on which the Company plans to
complete the Y2K modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans, and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, and similar uncertainties.
Additionally, material differences could be caused by the ability of third
parties that interface with the Company's systems to make all necessary
modifications for Year 2000 compliance.
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 and pricing of
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
6
<PAGE> 9
fluctuates due to numerous factors, including the Company's pricing strategies
and other 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 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. For the nine months ended September 30, 1997, Ingram
Micro/Alliance was the only vendor from whom purchases exceeded 10% of total
purchases, accounting for 12.65% of the Company's total purchases during such
period. 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% and 2.1%
of net sales for the year ended December 31, 1996 and the nine months ended
September 30, 1997, respectively. 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 $63.4 million at September 30, 1997, of which
approximately $73,000
7
<PAGE> 10
(.12%) of product inventory on-hand was more than 90 days old. The Company's
inventory turnover was 23.4 and 20.4 for the year ended December 31, 1996 and
the nine months ended September 30, 1997, respectively.
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 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, FedEx, Airborne 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
8
<PAGE> 11
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 certain
state court cases have imposed tax collection obligations on certain
out-of-state companies, the Company believes its operations are different from
the operations of the companies in those cases 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, in
the past several years, certain legislation has been introduced on more than one
occasion 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. Similar legislation is anticipated to be reintroduced during
1998. If such bill or another seeking similar obligations 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. On June 14, 1996, the district court
granted the Company's motion to dismiss the Amended Complaint, with prejudice,
on the grounds that the federal cause of action was barred by the statute of
limitations and the district court did not have jurisdiction over the pendant
state law claims. The former shareholder filed an appeal of the district court
decision to the United States Court of Appeals for the Seventh Circuit. On May
14, 1997, the Court of Appeals heard oral argument on the former shareholder's
appeal. On July 28, 1997, the Court of Appeals reversed the district court's
ruling and remanded the matter back to the district court for further
proceedings. The Court of Appeals held, among other things, that the district
court improperly granted the motion to dismiss the Amended Complaint because it
based its decision on inferences of fact inappropriate at this stage of the
proceedings. The parties are currently awaiting the assignment of the case to a
district court judge. The Company anticipates the case will be assigned during
the first quarter of 1998.
On June 10, 1997, the former shareholder filed in the Circuit Court of the
Nineteenth Judicial Circuit, Lake County, Illinois, a lawsuit alleging
essentially the same fraud and breach of fiduciary duty claims asserted in his
dismissed federal lawsuit. The Company and Mr. Krasny have answered the
Complaint and moved to strike a portion of the relief requested by the former
shareholder. In their answer to the Complaint, the Company and Mr. Krasny deny
any wrongdoing or liability. The Company anticipates this action will likely be
dismissed or stayed in light of the subsequent ruling by the Court of Appeals
discussed above. The Company and Mr. Krasny believe that the purchase of the
shares was conducted honestly and properly and
9
<PAGE> 12
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 55.6% 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
38.8% 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 3,984,358 shares of its Common Stock (after giving effect to the
sale of the Shares being offered hereunder).
SHARES ELIGIBLE FOR FUTURE SALE AND ISSUANCE OF ADDITIONAL SHARES
There will be 21,650,003 shares of Common Stock outstanding after
completion of this offering, of which 12,097,761 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 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> 13
THE COMPANY
CDW Computer Centers, Inc. is a leading direct marketer of over 25,000
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 3Com, 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 and the nine months ended September 30, 1997, the Company
serviced approximately 462,000 and 443,000 customers respectively. 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. Net sales grew to $926.2 million and net income
increased to $37.1 million for the nine months ended September 30, 1997. In
addition, its operating margin increased from 4.1%, on a pro forma basis, in
1992 to 5.8% in 1996 and 6.3% for the nine months ended September 30, 1997,
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 growth, in July, 1997 the Company moved into a 218,000
square foot combined warehouse, telemarketing, retail showroom and corporate
office facility in Vernon Hills, Illinois. 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> 14
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby. See "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 September 30, 1997, 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 5/32 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............................................. 70 42 7/8
June 30, 1997.............................................. 57 3/4 39 5/8
September 30, 1997......................................... 78 53
December 31, 1997.......................................... 69 1/4 45 1/4
March 31, 1998 (through January 7, 1998)................... 52 1/4 50 1/2
</TABLE>
The last reported sale price of the Company's Common Stock on January 7,
1998 was $50.50 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> 15
SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of November 30, 1997 and the number
of shares offered pursuant to this Prospectus by all Selling Shareholders. 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(3)
---------------------- NUMBER OF -----------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES PERCENT OFFERED(2) SHARES PERCENT
---- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Officers:
Daniel F. Callen.................... 1,500 * 24,868(4) 0 *
Donald M. Gordon.................... 375 * 18,011(5) 0 *
Harry J. Harczak, Jr................ 1,250 * 17,327(6) 750 *
Paul A. Kozak....................... 900 * 23,582(7) 150 *
James R. Shanks..................... 375 * 18,011(8) 0 *
Directors:
Michelle L. Collins................. 500 * 5,160(9) 500 *
Joseph Levy, Jr..................... 25,500 * 18,060(10) 22,500 *
</TABLE>
- -------------------------
* Less than 1%
(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. These figures include shares available under options
which are presently exercisable or become exercisable within the next sixty
(60) days.
(2) These figures represent shares available under options granted under the
CDW Incentive Stock Option Plan, the CDW Director Stock Option Plan, the
CDW 1996 Incentive Stock Option Plan and the CDW 1996 Officer and Manager
Bonus Plan, all of which were included in a Registration Statement on Form
S-8 filed by the Company of which this Prospectus is a part (together, the
"Plans").
(3) Assumes all options are exercised when vested and all shares received upon
exercise are sold hereunder.
(4) Reflects 18,250, 5,909 and 709 shares subject to options granted under the
CDW Incentive Stock Option Plan, the CDW 1996 Incentive Stock Option Plan
and the CDW 1996 Officer and Manager Bonus Plan, respectively. Of these
options 1,500, 3,000, 5,281, 3,781, 781, 782, 781, 781, 781 and 782 become
exercisable on December 31, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004,
2005 and 2006, respectively, and 1,477, 2,186, 1,477 and 1,478 options
become exercisable on January 1, 2000, 2001, 2002 and 2003, respectively.
Mr. Callen is the Chief Accounting Officer of the Company.
(5) Reflects 16,750 and 1,261 shares subject to options granted under the CDW
Incentive Stock Option Plan and the CDW 1996 Officer and Manager Bonus
Plan, respectively. Of these options 375, 1,875, 3,031, 3,781, 781, 782,
781, 781, 781, and 782 become exercisable on December 31, 1997, 1998, 1999,
2000, 2001, 2002, 2003, 2004, 2005 and 2006, respectively, 1,261 options
become exercisable on January 1, 2001, and 600 options become exercisable
on each of April 1, 1998, 1999, 2000, 2001 and 2002. Mr. Gordon is the Vice
President -- Advertising of the Company.
(6) Reflects 15,750 and 1,577 shares subject to options granted under the CDW
Incentive Stock Option Plan and the CDW 1996 Officer and Manager Bonus
Plan, respectively. Of these options 500, 1,250, 2,531, 2,281, 781, 782,
781, 781, 781 and 782 become exercisable on December 31, 1997, 1998, 1999,
2000, 2001, 2002, 2003, 2004, 2005 and 2006, respectively, 1,577 options
become exercisable on January 1, 2001, and 900 options become exercisable
on each of May 2, 1998, 1999, 2000, 2001 and 2002. Mr. Harczak is the Chief
Financial Officer of the Company.
(7) Reflects 15,250, 6,251, and 2,081 shares subject to options granted under
the CDW Incentive Stock Option Plan, the CDW 1996 Incentive Stock Option
Plan and the CDW 1996 Officer and Manager Bonus Plan, respectively. Of
these options 750, 2,250, 3,781, 3,781, 781, 782, 781, 781, 781 and 782
become exercisable on December 31, 1997, 1998, 1999, 2000, 2001, 2002,
2003, 2004, 2005 and 2006, respectively, and 1,562, 3,644, 1,563, and 1,563
options become exercisable on January 1, 2000, 2001, 2002 and 2003,
respectively. Mr. Kozak is the Vice President -- Purchasing of the Company.
13
<PAGE> 16
(8) Reflects 16,750 and 1,261 shares subject to options granted under the CDW
Incentive Stock Option Plan and the CDW 1996 Officer and Manager Bonus
Plan, respectively. Of these options 375, 1,875, 3,031, 3,781, 781, 782,
781, 781, 781 and 782 become exercisable on December 31, 1997, 1998, 1999,
2000, 2001, 2002, 2003, 2004, 2005 and 2006, respectively, 1,261 options
become exercisable on January 1, 2001, and 600 options become exercisable
on each of April 1, 1998, 1999, 2000, 2001 and 2002. Mr. Shanks is the Vice
President -- Information Technology of the Company.
(9) Reflects 5,160 shares subject to options granted under the CDW Director
Stock Option Plan which become exercisable on January 2, 2000.
(10) Reflects 18,060 shares subject to options granted under the CDW Director
Stock Option Plan, 3,000 of which presently are exercisable and 4,920,
4,980, and 5,160 of which become exercisable on January 3, 1998, January 2,
1999 and January 2, 2000, respectively.
PLAN OF DISTRIBUTION
The sale of the Common Stock by the Selling Shareholders may be effected
from time to time in one or more transactions (which may include block
transactions, ordinary brokered transactions, transactions in which brokers
solicit purchases and transactions directly with market makers) on the Nasdaq
National Market, in negotiated transactions or otherwise at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Brokers and dealers engaged by the Selling
Shareholders may receive commissions or discounts from the Selling Shareholders.
The Selling Shareholders and such brokers and dealers may be deemed
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), in connection with such sales.
There is no assurance that the Selling Shareholders will sell any or all of
the Common Stock offered by this Prospectus.
The Company has agreed to pay the legal fees and expenses incurred in
connection with the preparation and filing of the registration statement, of
which this Prospectus is a part, covering these shares of Common Stock and any
required updates to the registration statement. The Selling Shareholders are
responsible for any commissions, discounts or fees of underwriters, brokers,
dealers or agents, and any transfer taxes applicable to the shares sold by the
Selling Shareholders pursuant to this Prospectus.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Selling Shareholders by Patzik, Frank & Samotny Ltd., Chicago,
Illinois.
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 on the authority of such firm as
experts in accounting and auditing.
14
<PAGE> 17
=======================================================
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 OR THE SELLING
SHAREHOLDERS. 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
Selling Shareholders.................... 13
Plan of Distribution.................... 14
Legal Matters........................... 14
Experts................................. 14
</TABLE>
=======================================================
=======================================================
125,019 SHARES
[CDW LOGO]
CDW COMPUTER CENTERS, INC.
COMMON STOCK
------------------------
PROSPECTUS
JANUARY 8, 1998
------------------------
=======================================================
<PAGE> 18
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and Exchange Commission
by CDW Computer Centers, Inc. (the "Registrant") are incorporated by reference
in this Registration Statement:
(A) Annual Report on Form 10-K for the fiscal year ending
December 31, 1996, dated February 11, 1997.
(B) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997.
(C) The description of the Registrant's common stock set forth in
the Registrant's registration statement pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any amendment or report filed for the purpose of updating
any such description.
All documents subsequently filed by the Registrant pursuant to Section
13(a) and (c) of the Exchange Act and any definitive proxy or information
statements filed pursuant to Section 14 of the Exchange Act in connection with
any subsequent shareholders' meeting and any reports filed pursuant to Section
15(d) of the Exchange Act prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which
deregisters all securities that have not been sold, will be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
The Indemnification provisions applicable to the directors and officers of
the Registrant are set out in Article Ninth of the Articles of Incorporation
and Article VII of the By-Laws, respectively, as follows:
Articles of Incorporation
Ninth: The Corporation shall, to the full extent permitted by Section
8.75 of the Illinois Business Corporation Act, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
<PAGE> 19
Bylaws:
ARTICLE VII
INDEMNIFICATION OF
DIRECTORS, EMPLOYEES AND AGENTS
Section 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or who is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment or
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
unlawful.
Section 2. The corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor or by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application, that
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 1 and 2. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceedings, or (b) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (c) by the Stockholders.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding, as authorized by the Board of
Directors in the specific case, upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount, unless it
shall ultimately be determined that he is entitled to be indemnified by the
corporation authorized in this Article.
<PAGE> 20
Section 6. The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any contract, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Contractual:
The Registrant has entered into letter agreements with each of Michael P.
Krasny, the Registrant's Chairman, Chief Executive Officer, Secretary and
Treasurer, Gregory C. Zeman, the Registrant's President and a director, Daniel
B. Kass, the Registrant's Vice President -- Sales and a director and Mary C.
Gerlits, the Registrant's Vice President -- Corporate and Community Relations
(collectively, the "Indemnitees") pursuant to which, among other things, the
Registrant has agreed to indemnify and hold the Indemnitees harmless, to the
full extent permitted by law, from and against any and all losses, claims,
damages, liabilities, judgments, fines, penalties, amounts paid in settlement
and expenses (including reasonable attorneys' fees and costs of investigation
and preparation) incurred by the Indemnitees in connection with any action,
claim, suit or other proceeding instituted or threatened against the
Indemnitees by any person, firm, corporation, governmental body, agency or
instrumentality, or other proceeding brought by one or more of the security
holders of the Registrant, or in the name thereof), by reason of the
Indemnitees' indemnification of the underwriters of the Registrant's public
offerings of stock or the fact of, or in any way relating to, the Indemnitees
serving as a director or officer, or in a similar capacity of the Registrant or
of any of its affiliates, at any time, except to the extent that any such
liabilities or expenses result from the Indemnitees' willful misconduct, gross
negligence, fraud, actors or omissions not in good faith or transactions in
which the Indemnitees derived an improper personal benefit, in each case, as
determined by a court of competent jurisdiction in a final judgment from which
no further appeal can be taken. It shall not be deemed to be willful
misconduct, gross negligence or fraud if the Indemnitees act in good faith in
accordance with recommendations or policies of the management or any third
party professional advisor of the Registrant or its affiliates.
Item 7. Exemption.
Not Applicable.
Item 8. Exhibits.
EXHIBIT NO. EXHIBIT
----------- -------
5 Opinion of Patzik, Frank & Samotny Ltd.
23(a) Consent of Coopers & Lybrand L.L.P.
23(b) Consent of Patzik, Frank & Samotny Ltd.
(Contained in Exhibit 5)
24 Power of Attorney (included on signature page
of this Registration Statement)
<PAGE> 21
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes;
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement to include any material information
with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material
change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby further undertakes that,
for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
<PAGE> 22
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Village of Vernon Hills, State of Illinois,
on this 8th day of January, 1998.
CDW COMPUTER CENTERS, INC.
By:
-------------------------------------------
Name: Michael P. Krasny
Title: Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Michael P. Krasny and Gregory C. Zeman
and each of them acting alone, his or her true and lawful attorneys-in-fact or
agent, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as they might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on its behalf by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- --------------------------------------------- ------------
<S> <C> <C>
Chairman of the Board, Chief Executive
/s/ Michael P. Krasny Officer, Secretary and Treasurer (Principal
- ------------------------- Executive Officer) January 8, 1998
Michael P. Krasny
/s/ Gregory C. Zeman
- ------------------------- President and Director January 8, 1998
Gregory C. Zeman
/s/ Daniel B. Kass
- ------------------------- Vice President-Sales and Director January 8, 1998
Daniel B. Kass
- ------------------------- Director
Joseph Levy, Jr.
/s/ Michelle L. Collins
- ------------------------- Director January 8, 1998
Michelle L. Collins
/s/ Harry J. Harczak, Jr. Chief Financial Officer (Principal Financial
- ------------------------- Officer) January 8, 1998
Harry J. Harczak, Jr.
Vice President-Finance, Controller and Chief
/s/ Daniel F. Callen Accounting Officer (Principal Accounting
- ------------------------- Officer) January 8, 1998
Daniel F. Callen
</TABLE>
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------- ---------------------------------------------------------------- ------
<S> <C> <C>
5 Opinion of Patzik, Frank & Samotny Ltd.
23(a) Consent of Coopers & Lybrand L.L.P.
23(b) Consent of Patzik, Frank & Samotny Ltd. (contained in Exhibit 5)
24 Power of Attorney (included on signature page of
this Registration Statement)
</TABLE>
<PAGE> 1
EXHIBIT 5
OPINION OF PATZIK, FRANK & SAMOTNY LTD.
<PAGE> 2
[PATZIK, FRANK & SAMOTNY LTD. LETTERHEAD]
Board of Directors
CDW Computer Centers, Inc.
200 North Milwaukee Avenue
Vernon Hills, Illinois 60061
RE: CDW COMPUTER CENTERS, INC. REGISTRATION STATEMENT ON FORM S-8
Gentlemen:
We have acted as special counsel to CDW Computer Centers, Inc., an
Illinois corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement"), together
with Exhibits, filed with the Securities and Exchange Commission (the
"Commission") on January 8, 1998, relating to the registration of an offering by
the Company of up to 4,059,377 shares of the Company's common stock, par value
$.01 per share (the "Common Stock"). We have reviewed such records, documents
and matters of law as we have considered relevant for the purpose of delivering
this opinion.
In making our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as certified or
photostatic copies.
Based upon the foregoing, the shares of Common Stock, when sold in the
manner contemplated in the Registration Statement, will be legally issued,
fully paid and nonassessable.
We do not find it necessary for the purpose of this opinion, and
accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the sale of the Common
Stock.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
<PAGE> 3
[PATZIK, FRANK & SAMOTNY LTD. LETTERHEAD]
Board of Directors
January 8, 1998
Page 2
We hereby consent to the inclusion in the Registration Statement of
this opinion and to the references to our firm under the caption "Legal Matters"
in the prospectus filed with the Registration Statement.
Very truly yours,
/s/ PATZIK, FRANK & SAMOTNY LTD.
PATZIK, FRANK & SAMOTNY LTD.
SMP/cp
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF COOPERS & LYBRAND L.L.P.
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
CDW Computer Centers, Inc.
We consent to the incorporation by reference in the registration statement of
CDW Computer Centers, Inc. on Form S-8 of our reports dated January 22, 1997,
except for Note 10 as to which the date is February 10, 1997, on our audits of
the consolidated financial statements and financial statement schedule of CDW
Computer Centers, Inc. as of December 31, 1996 and 1995 and for the years ended
December 31, 1996, 1995 and 1994, which reports are included in the 1996 Annual
Report on Form 10-K. We also consent to the reference to our firm under the
caption "Experts" in the Prospectus contained in this registration statement on
Form S-8.
Coopers & Lybrand L.L.P.
Chicago, Illinois
January 8, 1998
