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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission file number   0-21796

CDW Corporation

(847) 465-6000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes x No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 8, 2003, 90,297,473 common shares were issued and 82,736,673 were outstanding.

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CDW CORPORATION AND SUBSIDIARIES
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Part I.  Financial Information
Item 1.  Financial Statements

CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

     The accompanying notes are an integral part of the consolidated financial statements.

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CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)

     The accompanying notes are an integral part of the consolidated financial statements.

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CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)

The accompanying notes are an integral part of the consolidated financial statements.

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CDW CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

     The accompanying notes are an integral part of the consolidated financial statements.

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CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.		Description of Business
		CDW Corporation (collectively with its subsidiaries, “CDW” or the “Company”) is the largest direct marketer of multi-brand computers and related technology products and services in the United States. In May 2003, our shareholders approved changing the name of the Company to CDW Corporation from CDW Computer Centers, Inc. The name change became effective on June 18, 2003. Our primary business is conducted from a combined corporate office and distribution center located in Vernon Hills, Illinois, and sales offices in Mettawa and Chicago, Illinois, and Lansdowne, Virginia. Additionally, we market and sell products through CDW.com and CDWG.com, our Web sites.
2.		Summary of Significant Accounting Policies
		Basis of Presentation
		The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Such principles were applied on a basis consistent with those reflected in our 2002 Annual Report on Form 10-K and documents incorporated therein as filed with the Securities and Exchange Commission. The accompanying financial data should be read in conjunction with the notes to consolidated financial statements contained in our 2002 Annual Report on Form 10-K and documents incorporated therein. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring accruals) necessary to present fairly our financial position as of June 30, 2003 and December 31, 2002, the results of operations for the three and six month periods ended June 30, 2003 and 2002, the cash flows for the six month periods ended June 30, 2003 and 2002, and the changes in shareholders’ equity for the six month period ended June 30, 2003. The unaudited condensed consolidated statements of income for such interim periods are not necessarily indicative of results for the full year.
		Use of Estimates
		The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. See the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002 for an additional discussion of the most significant accounting policies and estimates used in the preparation of our financial statements.
		Stock-Based Compensation
		At June 30, 2003, we had several stock-based employee compensation plans. In accordance with Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”),

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we account for our stock-based compensation programs according to the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, compensation expense is recognized to the extent of employee or director services rendered based on the intrinsic value of compensatory options or shares granted under the plans. The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation for the three and six month periods ended June 30, 2003 and 2002 (in thousands, except per share amounts):

3.		Marketable Securities
		The amortized cost and estimated fair values of our investments in marketable securities at June 30, 2003, were (in thousands):

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Estimated fair values of marketable securities are based on quoted market prices. The amortized cost and estimated fair value of our investments in marketable securities at June 30, 2003, by contractual maturity, were (in thousands):

		As of June 30, 2003, all of the marketable securities that are due in greater than one year have maturity dates prior to June 17, 2005.
		The gross unrealized holding gains and losses on available-for-sale securities are recorded as accumulated other comprehensive income, which is reflected as a separate component of shareholders’ equity. The gross realized gains and losses on marketable securities that are included in other expense in the Condensed Consolidated Statements of Income are not material.
4.		Financing Arrangements
		We have an aggregate $70 million available pursuant to two $35 million unsecured lines of credit with two financial institutions. One line of credit expires in June 2004, at which time we intend to renew the line, and the other does not have a fixed expiration date. Borrowings under the first credit facility bear interest at the prime rate less 2 1/2%, LIBOR plus 1/2% or the federal funds rate plus 1/2%, as determined by the Company. Borrowings under the second credit facility bear interest at the prime rate less 2 1/2%, LIBOR plus .45% or the federal funds rate plus .45%, as determined by the Company. At June 30, 2003, there were no borrowings under either of the credit facilities.
		We have entered into security agreements with certain financial institutions (“Flooring Companies”) in order to facilitate the purchase of inventory from various suppliers under certain terms and conditions. The agreements allowed for a maximum credit line of $64 million collateralized by inventory purchases financed by the Flooring Companies. At June 30, 2003, all amounts owed the Flooring Companies were included in trade accounts payable.
5.		Earnings Per Share
		At June 30, 2003, we had outstanding common shares totaling 82,665,072. We have granted options to purchase common shares to the directors and coworkers of CDW under several stock option plans. These options have a dilutive effect on the calculation of earnings per share. The following table is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations as required by Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (in thousands, except per share amounts):

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Additional options to purchase common shares were outstanding during the three and six month periods ended June 30, 2003, but were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of common shares during the respective periods. The following table summarizes the weighted-average number, and the weighted-average exercise price, of those options which were excluded from the calculation:

		The options were all outstanding at June 30, 2003.
6.		Share Repurchase Programs
		In January 2001, our Board of Directors authorized the purchase of up to 5,000,000 shares of our common stock. From January 2001 through September 30, 2002, we purchased the 5,000,000 shares authorized to be repurchased at a total cost of $204.6 million (an average price of $40.92 per share).
		In July 2002, our Board of Directors authorized another share repurchase program of up to 2,500,000 shares of our common stock. These purchases may be made from time to time in both the open market and private transactions, as conditions warrant. This program will remain in effect through July 2004, unless earlier terminated by the Board or completed. Under this repurchase program, we purchased 1,845,024 shares of our common stock during the six month period ended June 30, 2003, at a total cost of $76.0 million (an average price of $41.18 per share). From July 2002 through June 30, 2003, we purchased 2,353,400 shares of our common stock under this program at a total cost of $97.8 million (an average price of $41.57 per share).
		In July 2003, our Board of Directors authorized a new share repurchase program, as described in Note 9.
		Repurchased shares are held in treasury pending use for general corporate purposes, including issuances under various employee stock plans.
7.		Segment Information
		We are engaged in the sale of multi-brand computers and related technology products and services, primarily through direct marketing. We have two operating segments: corporate, which is primarily

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		comprised of business customers, but also includes consumers, and public sector, which is comprised of federal, state and local government and educational institution customers. In accordance with Statement of Financial Accounting Standards No. 131, “Disclosure about Segments of an Enterprise and Related Information,” the internal organization that is used by management for making operating decisions and assessing performance is the source of our reportable segments.
		The accounting policies of the segments are the same as those described previously in the “Summary of Significant Accounting Policies.” We allocate resources to and evaluate performance of our segments based on both sales and operating income. Our corporate segment provides purchasing, merchandising, accounting, information technology, marketing, distribution and fulfillment services to the public sector segment. Certain elements of gross margin and operating expenses are subject to intercompany service agreements which provide for, among other things, a mark-up on intercompany sales and allocation of indirect expenses such as occupancy, operations and other support, payroll, training and benefits. The table below presents information about our reportable segments: