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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

OR

Commission file number      0-21796

CDW Computer Centers, Inc.

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [ X ]

As of June 28, 2002, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates was approximately $2.722 billion, based upon the closing market price per share of $46.81.

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

As of March 19, 2003, the registrant had 83,859,884 shares of common stock, $0.01 par value, outstanding.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2003, to be filed not later than April 30, 2003, are incorporated by reference into Part III.

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CDW COMPUTER CENTERS, INC.
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2002
INDEX

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PART I

Item 1.    Business.

General

     CDW Computer Centers, Inc. (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. The Company was founded in 1984 and reincorporated in 1995 in Illinois. Our extensive offering of products, including hardware, software and accessories, combined with our service offerings, provide comprehensive solutions for our customers’ technology needs. We offer customers a broad range of technology products from leading vendors such as Cisco, Hewlett-Packard, IBM, Intel, Microsoft, Sony and Toshiba, among others. Our high volume, cost-efficient operations, supported by our proprietary information technology systems, enable us to offer these products at competitive prices combined with a high level of service, an approach we call “high tech, high touch.” Our value-added services include the ability to custom configure multi-branded solutions for our customers and offer technical support 24 hours a day, 7 days a week.

     We have more than 1,300 account managers and sales specialists who sell primarily to commercial customers. For financial reporting purposes, we have two operating segments: corporate, which is primarily comprised of business customers, but also includes consumers (consumers generated approximately 3% of total net sales in 2002), and public sector, which is comprised of federal, state and local government and educational institution customers who are served by CDW Government, Inc. (“CDW-G”), a wholly-owned subsidiary. Our corporate customers are concentrated in the small to medium business (SMB) category. The discussions of sales and marketing activities for the corporate segment and any reference to commercial accounts exclude consumers. (See Note 14 to the Consolidated Financial Statements for certain financial information regarding our two operating segments.)

     We market to current and prospective customers through our catalogs, other direct mailing programs, product advertisements in computer trade magazines, our Web sites and various Web advertising vehicles. Additionally, we promote the CDW brand on a national basis through our branding campaign, which includes television, print media and other activities. Our marketing efforts are integrated with a proactive calling program by our account managers. We also focus significant efforts on developing and expanding our E-business initiatives. These initiatives include CDW.com and CDWG.com (our Web sites), and CDW@work and CDWG@work (our extranets), which are customized Web sites for our commercial customers.

     For the year ended December 31, 2002, we served approximately 361,000 commercial accounts, which comprised 97% of our total net sales. We focus on generating repeat sales from existing customers while also generating sales from new customers. We engender a high degree of customer loyalty through our relationship-based account managers. These account managers are knowledgeable about customer needs and assist customers by providing advice on the selection and configuration of multi-branded technology solutions.

     We adhere to a core philosophy known as the CDW CIRCLE OF SERVICE™, which places the customer at the center of all of the Company’s actions. The philosophy is based on the premise that “People Do Business With People They Like.” The CDW CIRCLE OF SERVICE™ is a graphic reminder to our coworkers that good service leads to good experiences and increased sales. A fundamental element of the CDW CIRCLE OF SERVICE™ is our coworkers, who are highly motivated and incented to share in the Company’s success.

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     Electronic versions of CDW’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports are available free of charge through our Web sites, CDW.com and CDWG.com, as soon as reasonably practicable after we electronically file these reports with the Securities and Exchange Commission.

Business Strategy

     Our business strategy is to be a high volume, cost-efficient direct marketer of multi-brand, competitively-priced computers and related technology products and services while providing a high level of support to our customers. We believe that the following factors are of principal importance in our ability to implement this “high tech, high touch” business strategy:

     Multi-Branded Solutions. We offer more than 80,000 products, which include a wide range of product types from leading manufacturers including Cisco, Hewlett-Packard, IBM, Intel, Microsoft, Sony and Toshiba. With this broad selection of products, we can provide our customers with fully-integrated, multi-branded technology solutions and the convenience of one-stop shopping. We also continuously review and enhance our product mix based on new product introductions and the buying needs of our customers.

     Customer Focus. We focus our sales and marketing efforts on attracting and serving commercial customers rather than consumers. We believe commercial customers typically have ongoing requirements to purchase sophisticated products and systems and value our relationship-based approach and high level of service. In 2002, sales to commercial customers comprised 97% of total net sales.

     We also continue to grow our public sector business, which is directed at meeting the technology needs of federal, state and local governments, and primary and secondary educational institutions. We serve these markets, which have different purchasing requirements, with a field sales force that actively calls on customers and prospects in person to augment the Company’s inside sales force. We also reach our public sector customer base through our customized Web site, CDWG@work.

     Competitive Pricing. We are able to offer our customers competitive prices due to our low cost structure, efficient distribution methods, ability to purchase products directly from manufacturers and economies of scale in purchasing products. Our size and financial strength allow us to negotiate advantageous purchasing terms and earn vendor rebates and incentives.

     Marketing. We use a marketing mix of direct response activities, including our catalogs and trade magazine advertising, combined with a multifaceted branding campaign, including national television advertising. These activities are intended to generate customer response and a high level of awareness of CDW. Our marketing activities are directed to commercial users and the decision makers in commercial organizations.

     Customer Service. We have over 1,300 account managers and sales specialists who are highly trained in the Company’s products, systems and philosophies, enabling them to provide a high level of customer service. We assign an account manager to each customer. Account managers understand their customers’ businesses and technology systems and are able to recommend integrated product solutions based on customer needs, past purchases and technological developments. Our account managers provide a high level of customer service through CDW’s proprietary customer relationship management system. Customers also benefit from specialty sales support teams that have in-depth knowledge of and experience with complex technology products and applications such as network solutions, storage applications and software licenses.

     Custom Configuration. We offer custom configuration services such as the installation of accessories and expansion products, loading of software, imaging for custom applications and configuration of network operating systems. Our custom configuration services benefit our customers by reducing the cost and time necessary to deploy new products into their existing technology environment.

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     Technical Support. Our technical staff is well-trained and maintains the highest levels of professional certification from manufacturers. We employ a technical staff of more than 130 with over 470 manufacturer certifications to assist the customer with technical questions and issues. We offer technical support services by telephone 24 hours a day, 7 days a week. We believe that our commitment to service at the time of sale and after the purchase maximizes sales and encourages repeat customers.

     Information Technology. We use proprietary, real-time information technology systems which centralize management of key functions and generate daily operating control reports enabling management to identify and respond quickly to internal changes and trends in the industry and to provide high levels of customer satisfaction. We integrate our real-time systems with CDW.com and CDWG.com, our Web sites, providing real-time information for our customers.

     Effective Inventory Control. Our management information systems, purchasing system, radio frequency-based cycle counting system and use of vendor stock balancing and price protection programs allow us to minimize our investment in inventory and to reduce inventory discrepancies and the risk of obsolescence while meeting customer needs. These systems resulted in the Company achieving approximately 27 inventory turns during 2002.

     High Quality Personnel. We strive to attract, retain and motivate high quality personnel and provide our coworkers with financial incentives designed to maximize performance and productivity. Our objective is, whenever possible, to promote people from within to positions of increased responsibility. We have instituted short-term incentive programs, stock-based compensation and an on-site childcare and fitness center facility to reward and motivate all of our coworkers.

Product Offering

     We offer multi-brand computers and related technology products, including hardware and peripherals, software, networking and communication products and accessories, for use with microcomputers based on a variety of operating platforms, including Microsoft, Apple, Linux, Novel, Oracle and others. Aggressive inventory management allows us to limit our on-hand inventory and ship orders generally on a same-day basis.

     We continually seek to expand and improve our relationships with manufacturers as well as increase the number of products which we are authorized to sell.

Purchasing and Vendor Relationships

     We believe that effective purchasing from a diverse vendor base is a key element of our business strategy. For the year ended December 31, 2002, Tech Data and Ingram Micro were the only individual distributors from whom our purchases exceeded 10% of total purchases. Additionally, in 2002, Hewlett-Packard and Microsoft were the only individual manufacturers whose products comprised more than 10% of our total sales.

     Our marketing and purchasing staffs work together to identify reliable, high-quality suppliers of products, then actively negotiate to achieve the lowest possible cost and expand vendor support programs. We seek to establish strong relationships with our vendors, and employ a policy of paying vendors within stated terms and taking advantage of all appropriate discounts. Several of our leading vendors such as Hewlett-Packard and Microsoft have full-time representatives on-site at the Company’s facilities.

     We purchase products for resale both directly from manufacturers and indirectly through distributors and other sources, all of whom we consider our vendors. During 2002, we purchased approximately 53% of our merchandise directly from manufacturers and the remaining amount from distributors and other sources. We are authorized by manufacturers to sell via direct marketing all or selected products offered by the manufacturer. Our authorization with each manufacturer provides for certain terms

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and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor support programs, such as purchase or sales rebates and cooperative advertising reimbursements. Vendors also periodically offer the Company bulk inventory purchase opportunities to purchase a large amount of product at reduced prices. Vendor support programs are at the discretion of the vendors and usually require the achievement of a specified sales volume or growth rate to qualify for all, or some, of the incentive program.

Inventory Management/Distribution

     We apply our proprietary information technology systems to the task of managing our inventory in an aggressive, cost-efficient manner, resulting in a rapid-turn inventory model. Our information technology systems provide information on each item of inventory from the time it is ordered until it is shipped to a customer. We generally only stock items that have attained a minimum sales volume. All of our inventory items contain UPC bar codes that are matched to our internal product codes which allow the system to track and discern trends with respect to product movement and inventory obsolescence. We also use vendor stock balancing and price protection programs to minimize our investment in inventory.

     Our distribution process is highly automated. Once a customer order is received, either by phone, online or fax, it is processed for credit approval. After credit approval is received, orders are automatically routed to our warehouse for shipping. All product picking is performed using bar-coded labels, UPC bar codes and radio frequency scanning. All product shipments travel through our warehouse on automatic conveyor systems with in-line scanning and are subject to numerous quality control checks. Our sorting system automatically provides a final quality control check and directs boxes to the appropriate commercial carrier.

     We believe that the Chicago metropolitan area is an excellent location for our business as it is centrally located for purposes of shipping products throughout the United States and provides timely access to our principal distributors. Our location enables the Company to obtain non-stocked items for same-day shipping. The relocation of key distributors utilized in our purchasing model could adversely impact our results of operations. We believe that competitive sources of supply are available in substantially all of the merchandise categories we carry.

Marketing and Advertising Activities

     We market to our current and prospective customers using catalogs, promotional mailing campaigns, advertising and a proactive outbound calling program. In addition, we promote the CDW brand through a national branding campaign, which includes print media, television advertisements and other activities.

     Catalogs are one of our main advertising vehicles and approximately 40 million catalogs are produced and distributed each year. Our catalog strategy has evolved to include specialty catalogs such as networking communications and software. Our main catalog now includes relevant content such as interviews with industry executives and noteworthy technology developments. In 2000, we launched a Customer Technology Seminar Series, hosting representatives from industry manufacturers and influential persons in the technology field who discuss the latest information technology issues with our customers. Customers who are unable to attend the series can access the presentations on the Company’s Web sites.

     As a result of our relationships with our vendors, a substantial portion of our advertising and marketing expenses are reimbursed through cooperative advertising reimbursement programs. These cooperative advertising programs are at the discretion of our vendors and are typically tied to sales or purchasing volumes and other commitments required by the Company. In order to measure the effectiveness of our marketing activities, we track responses to our various efforts by a variety of means. We use this information to further refine our marketing strategy and to develop more effective programs.

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E-business

     We utilize our Web sites and extranets to implement our “high tech, high touch” business strategy. Our objective is to make it easy for our customers to transact business with the Company and ultimately to enhance our customer relationships. Our Web sites include many advanced features to attract new customers and produce sales, including more than 80,000 computer products to search and order online, advanced search capabilities, product specifications, and information on product availability and pricing. During 2002 and 2001, we generated $829.2 million and $615.3 million, respectively, of direct online sales over our Web sites. We also offer side-by-side product comparisons, links to product reviews, newsworthy announcements, personalized access and customized two-way interaction that allows for checking order status.

     We continue to enhance our award-winning, customized Web sites, marketed as CDW@work and CDWG@work extranets. These sites give customers online access to information such as order status, accounts payable details, purchase history and details about their dedicated CDW or CDW-G account team. Customers may also use their site to automate technology purchasing procedures, inventory asset-tagged items, reprint invoices and retrieve quotes prepared by their account manager. In addition, we have, through our strong relationships with vendors, arranged for links between vendors’ Web sites and our own. Many customers use the extranets to gather product information, including pricing and availability, and then follow up with their account manager to access the account manager’s knowledge base regarding product compatibility and other information. In 2002, sales to customers with active extranets, including online orders and those placed directly with account managers, totaled approximately $3.0 billion, representing approximately 70% of total sales.

Sales Activities and Order Fulfillment

     Our success is due in part to the strength of our account managers who manage customer relationships by responding to customer inquiries and proactively calling existing and potential new customers. Our account managers are trained in Company systems and philosophies, have in-depth product knowledge and are motivated to maximize operating income and provide high levels of customer service. All account managers are graduates of CDW University, our proprietary sales training program. New account managers are immersed in the University’s intense College of Sales and complete an 11-week sales consulting, product training, systems and customer service curriculum. We seek to build customer relationships by assigning each customer to the account manager who first serves the customer. Upon subsequent calls to CDW, the customer is directed to their account manager for assistance. In the spirit of teamwork, account managers are encouraged to cooperate and work together to maximize operating income and customer satisfaction.

     Each catalog and advertisement distributed by the Company bears a toll-free number to be used by customers in phoning CDW to place a product order. Telephone calls are answered by account managers who utilize on-line computer terminals to retrieve information regarding product characteristics, cost and availability and to enter customer orders. Account managers enter orders on-line into a computerized order fulfillment system which updates our customer purchase history. Computer processing of orders is performed immediately following the placement of the order and upon receipt of credit approval. We ship most credit approved orders on the day the order is received. We generally ship products to customers by Airborne, A.I.T., Eagle, FedEx, FedEx Ground, United Parcel Service and other commercial delivery services and invoice customers for shipping charges.

     Our account managers are generally compensated pursuant to a commission schedule based upon the gross profit they generate. Our account managers have the authority to negotiate and adjust prices for products, provided that the account manager sells the product at a price which meets established management guidelines and pursuant to various contracted prices, where applicable. Our account managers have the opportunity to achieve relatively high compensation levels and have historically shown increased productivity as training and experience levels increase.

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Customers

     We served approximately 361,000 commercial customers for the year ended December 31, 2002. For the year ended December 31, 2002, sales to our commercial customers accounted for approximately 97% of total net sales. We are not dependent on any one customer. For the year ended December 31, 2002, our largest customer comprised only .50% of net sales and our top five customers comprised approximately 1.30% of net sales. Our corporate customers are primarily small and medium size businesses that generally have less than 1,000 employees at a single location. We also serve larger corporate customers, including FORTUNE 1000 companies, as either a primary or secondary vendor. CDW-G, which conducts the Company’s public sector business, focuses on meeting the technology needs of federal, state and local governments, as well as primary and secondary educational institutions.

     Our customers are located almost entirely in the United States. In 2002, approximately 11% of our net sales were to customers in Illinois, approximately 33% were to customers in the eastern United States, approximately 19% were to customers in the southern United States, approximately 21% were to customers in the western United States and approximately 15% were to customers in the midwestern United States (excluding Illinois). Approximately 1% of our sales in 2002 were to customers outside of the continental United States.

Custom Configuration and Technical Support

     We offer custom configuration services, including installation of accessories or expansion products, software loading, network configuration and custom applications imaging. Custom configurations provide additional value to our customers because they reduce the cost and time necessary to deploy new products into their existing technology environments. The ability to configure products to customer specifications enables CDW to generate incremental sales. We have the infrastructure in place to double the number of custom-configured products.

     Our technical support staff is well trained and maintains the highest levels of professional certification from manufacturers, including that of Microsoft Certified Systems Engineer (MCSE) and Novell Certified Network Engineer. Our technical support staff is motivated to obtain high certification levels, as they are compensated, in part, on the basis of those certifications. Technical support is available by telephone 24 hours a day, 7 days a week to assist customers with technical problems or answer questions in order to increase customer satisfaction and reduce product returns. We have developed a proprietary customer service tracking system to ensure that customer-initiated service requests are responded to rapidly. As a result, substantially all customer service calls are answered in one minute or less.

Information Technology Systems

     Our information technology systems are a key element in our ability to maintain what we believe is the lowest cost structure among multi-brand direct marketers of computers and related technology products and services. We have installed and operate customized information technology and telephony systems. Collectively, these systems allow for centralized management of key functions, including inventory, accounts receivable, purchasing, sales and distribution. Additionally, our systems enable the preparation of daily operating control reports which provide thorough, detailed and timely information regarding key aspects of our business. Our proprietary information technology systems enable us to enhance productivity, ship customer orders on a same-day basis, respond quickly to industry changes and provide high levels of customer service. Historical customer orders are tracked within our system so that we can provide our customers with updates regarding product upgrades and other information relating to the products they purchase from the Company.

     Our success is dependent on the accuracy and proper utilization of our information technology and telephony systems. We anticipate that we will continue to require software and hardware upgrades for our current information technology systems. In addition, our ability to adapt our systems to changes in the

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competitive environment or to take advantage of additional automation is dependent on our ability to recruit and retain qualified information technology professionals.

     The integrity of our information technology systems is vulnerable to certain forms of disaster including, but not limited to, natural disasters such as tornadoes. We have established a disaster recovery plan that utilizes a backup system for our information technology and telephone systems. The primary components of our information technology systems and the hardware for backup systems are maintained at separate locations.

Coworkers, Training and Culture

     At December 31, 2002, we employed approximately 2,900 coworkers. We consider our coworker relations to be excellent. No coworkers are covered by collective bargaining agreements.

     We emphasize the recruiting, training and development of high quality coworkers throughout our organization. Our objective is to promote people from within to positions of increased responsibility, whenever possible. We develop our coworkers through CDW University, our company-wide training program with colleges of specialization. The colleges of CDW University provide specialized training in sales and relationship-building techniques, technical certifications and leadership development skills. In 2001, the College of Performance Excellence was added to the existing colleges of Sales, Technology, Knowledge Management and Leadership. The College of Performance Excellence offers more than fifteen instructor-led courses designed to enhance coworkers’ interpersonal and professional skills.

     We strive to create a supportive and rewarding work environment. In 2003, we were named by FORTUNE magazine as one of the “100 Best Places to Work in America” for the fifth consecutive year. Our Vernon Hills facility contains an on-site childcare and fitness center. Additionally, we sponsor a series of English language classes for coworkers who speak English as a second language, provide on-site dry cleaning and private rooms for nursing mothers. CDW coworkers are encouraged to provide their thoughts and concerns regarding the Company directly to management.

Incentive and Regular Compensation Arrangements

     Compensation Arrangements. Our coworkers are generally compensated on a basis that rewards performance and the achievement of identified goals. For example, account managers receive compensation pursuant to a monthly commission schedule which is based on performance. Account managers have the authority to negotiate and adjust prices for products, provided that the account manager sells the product at a price which meets established management guidelines and pursuant to various contracted prices, where applicable. Account managers have the opportunity to achieve relatively high compensation levels and have historically shown increased productivity as training and experience levels increase. In addition, most coworkers, excluding the Company’s sales force, are eligible for monthly, quarterly or annual bonus programs that are tied to achieving certain goals. We believe that these incentives positively impact the Company’s performance and profitability.

     Coworker Bonus, Stock Option and Restricted Stock Plans. In addition to regular compensation, we provide coworkers with additional long-term incentives designed to maximize performance and productivity. To this end, we have adopted various stock-based compensation plans which enable coworkers to share in the Company’s success through appreciation in the value of the Company’s stock. We reward every coworker with a stock option grant as a part of their compensation.

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Business Technology Centers

     We currently operate two Business Technology Centers allowing local customers an opportunity to examine products prior to purchase and to meet face-to-face with our sales or technical coworkers. One of these centers is located at our main facility in Vernon Hills, Illinois, and the other is located in Chicago, Illinois. These centers occupy approximately 5,100 square feet each.

Trademarks and Trade Names

     We conduct business under a number of trademarks, trade names and service marks, some of which are registered; for example “CDW,” “CDW. The Right Technology. Right Away.,” “CDW CIRCLE OF SERVICE,” “CDW@work,” “CDW-G,” “CDWG@work” and “Direct Solutions Provider.” We have taken steps to register and protect these marks and believe they have significant value and are important factors in our marketing programs.

Certain Factors Affecting CDW’s Business

     There are many factors that affect our business and the results of operations, some of which are beyond our control. The following is a description of some important factors that may cause the actual results of operations in future periods to differ materially from those currently expected or desired.

     Vendor Relationships and Product Availability. We purchase products for resale both directly from manufacturers and indirectly through distributors and other sources, all of whom we consider our vendors. We are authorized by manufacturers to sell all or some of their products via direct marketing. Our authorization with each manufacturer is subject to specific terms and conditions regarding such things as product return privileges, price protection policies, purchase discounts and vendor incentive programs such as purchase rebates, sales volume rebates and cooperative advertising reimbursements. From time to time, vendors may terminate the right of the Company to sell some or all of their products or change these terms and conditions or reduce or discontinue the incentives that they offer the Company. Any such termination or implementation of such changes could have a negative impact on our operating income. Additionally, some products are subject to manufacturer allocation, which limits the number of units of such products that are available to resellers, including the Company. Sales of Hewlett-Packard (including Compaq), IBM, Microsoft, Sony, Toshiba and Cisco products comprise a substantial portion of our sales. In 2002, products from each of Hewlett-Packard and Microsoft represented more than 10% of our total sales. In addition, although we purchase from a diverse vendor base, in 2002, products purchased by the Company from each of distributors Tech Data and Ingram Micro represented more than 10% of our total purchases. The loss of any of these or any other key vendors, or the diminished availability of their products, could reduce the supply and increase the costs of products sold by the Company and negatively impact our competitive position. In 2002, Compaq merged into Hewlett-Packard. Although to date this merger has not had an adverse impact on our business and results of operations, further consolidation among manufacturers could adversely impact the Company.

     Information Technology Systems. Our success is dependent on the accuracy, proper utilization and continuing development of our information technology systems, including our business application systems, Web servers and telephony system. The quality and our utilization of the information generated by the information technology systems affects, among other things, our ability to conduct business with our customers, manage our inventory and accounts receivable, purchase, sell, ship and invoice our products efficiently and on a timely basis and maintain our cost-efficient operating model. While we have taken steps to protect our information technology systems from a variety of threats, including computer viruses and malicious hackers, there can be no guarantee that such steps will be effective. Any disruption to or infiltration of our information technology systems could significantly harm our business and results of operations.

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     New Technologies and Products. The market for computers and related technology products and services has evolved as a result of the development of new technologies that are transformed by manufacturers into new products and applications. We have been and will continue to be dependent on the development of new technologies and products by manufacturers, as well as the acceptance of those technologies and 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 those technologies and products by end-users, could have an adverse effect on our business and results of operations.

     Sales Force. Our statistics show that the level of sales achieved by our account managers increases with the number of years of experience they have with the Company. Our rate of sales growth and our operating results would be negatively affected if we were unable to expand the size of our sales force, if the turnover rate of account managers increases from historical levels or if the sales volumes achieved by our account managers does not increase with experience.

     Competition. The market for computers and related technology products and accessories is highly competitive. Our competition includes national direct marketers, such as Insight Enterprises, MicroWarehouse, PC Connection, PC Mall and Zones; manufacturers who sell directly to end-users, such as Dell and Gateway; computer superstores, such as CompUSA; government resellers, such as GTSI; consumer electronic and office supply superstores, such as Best Buy, Circuit City, Office Depot, Office Max and Staples; value-added resellers; corporate resellers, such as CompuCom; and Web resellers, such as Amazon.com and Buy.com.

     Some of our hardware and software vendors, such as Hewlett-Packard and IBM, have sold, and continue to intensify their efforts to sell, their products directly to end-users. In addition, some software manufacturers have developed, and may continue to develop, sales methods that directly provide customers with subscription-based software programs and packages. If either of these trends becomes more prevalent, it could adversely affect our sales growth and profitability.

     We believe that competition may increase in the future, which could require us to reduce prices, increase advertising expenditures or take other actions which may have an adverse effect on our operating results. Some of our competitors have reduced their prices in an attempt to stimulate sales and limit the impact of the current economic slowdown. Decreasing prices of computers and related technology products and accessories resulting from competition and technological changes require us to sell a greater number of products to achieve the same level of net sales and gross profit. If this trend continues and we are unable to attract new customers and sell increased quantities of products, our sales growth and profitability could be adversely affected.

     Inventory Risk. We are exposed to inventory risks as a result of the rapid technological changes that affect the market and pricing for the products we sell. We seek to minimize our inventory exposure through a variety of inventory management procedures and policies, including our rapid-turn inventory model, as well as vendor price protection and product return programs. However, if we were unable to maintain our rapid-turn inventory model, if there were unforeseen product developments or if vendors change their terms and conditions, our inventory risks could increase. We also periodically take advantage of cost savings associated with certain opportunistic bulk inventory purchases offered by our vendors. These bulk purchases could increase our exposure to inventory obsolescence.

     Natural Disaster or Other Adverse Occurrence. We operate our business from a primary facility in Vernon Hills, Illinois. Although we have multiple sales office locations, substantially all of our corporate, warehouse and distribution functions are located at the Vernon Hills facility. If the warehouse and distribution equipment at the Vernon Hills facility were to be seriously damaged by a natural disaster or other adverse occurrence, we could utilize third-party distributors to ship products to our customers. However, this may not be sufficient to avoid interruptions in service and may not enable us to meet all of the needs of our customers. Additionally, this would cause the Company to incur incremental operating

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costs. As a result, a natural disaster or other adverse occurrence at our primary facility in Vernon Hills could negatively impact our business and profitability.

     Dependence on Commercial Delivery Services. We generally ship products to customers by Airborne, A.I.T., Eagle, FedEx, FedEx Ground, United Parcel Service and other commercial delivery services and invoice customers for shipping charges. If we are unable to pass on future increases in the cost of commercial delivery services to our customers, our profitability could be adversely affected. Additionally, strikes or other service interruptions by such shippers could adversely affect our ability to deliver products on a timely basis.

     General Economic Conditions. Continued weak general economic conditions, along with uncertainties in political conditions, could adversely impact our revenues and growth rate. During the year ended December 31, 2002, the information technology market continued to weaken, particularly in the corporate segment. Continued softness in the information technology market could result in lower demand for our products and services. In 2002, we continued to be impacted by the effects of the economic downturn, most notably a decline in I.T. budgets and a decline in the average selling prices of desktop computers, servers and notebook computers. In addition, our revenues, gross margins and earnings could deteriorate in the future as a result of unfavorable economic or political conditions.

     Public Sector Contracts. Revenues from the public sector segment are derived from sales to state, federal and local governmental departments and agencies, as well as to educational institutions, through various contracts and open market sales. Government contracting is a highly regulated area. Noncompliance with government procurement regulations or contract provisions could result in civil, criminal, and administrative liability, including, but not limited to, substantial monetary fines or damages, termination of government contracts, and suspension, debarment or ineligibility from doing business with the government. The effect of any of these possible actions by any governmental department or agency could adversely affect our business and results of operations.

     Global Market Risk. Portions of our products are either produced, or have major components produced, in the Asia Pacific region. We engage in U.S. dollar denominated transactions with U.S. divisions and subsidiaries of companies located in this region. As a result, we may be indirectly affected by risks associated with international events, including economic and labor conditions, political instability, tariffs and taxes, availability of products and currency fluctuations in the U.S. dollar versus the regional currencies. In the past, countries in the Asia Pacific region, including Japan, have experienced volatility in their currency, banking and equity markets. Future volatility could adversely affect the supply and price of products and components and ultimately, our results of operations.

     State and Local Sales/Use Tax. We currently collect state and local sales/use tax only on sales of products to non-exempt residents of the State of Illinois and on sales to some customers in a limited number of other states as required by law. Various states have sought to require the collection of state and local sales/use taxes on the sale of products shipped to the taxing state’s residents by direct marketers. The United States Supreme Court has ruled that no state, absent Congressional legislation, may impose tax collection obligations on a direct marketer whose only contacts with the taxing state are the distribution of catalogs and other advertisement materials through the mail and the delivery of purchased goods by U.S. mail or interstate common carriers. We cannot predict the level of contact, including Web activities, with any state which would give rise to future or past tax collection obligations within the parameters of the Supreme Court cases. Additionally, on several occasions in the past several years, including recently, legislation has been introduced in the United States Congress which, if passed, could impose state or local sales/use tax collection obligations on direct marketers such as CDW. If Congress enacts legislation that permits states to impose tax collection obligations on direct marketers, or we are deemed to have a physical presence in one or more states, additional tax collection obligations may be imposed on the Company. This would likely result in additional costs and administrative expenses to CDW, price increases to our customers and reduced demand for our products, any or all of which would adversely affect our operating results.

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Item 2.      Properties.

     We own our primary location and headquarters in Vernon Hills, Illinois, which includes our warehouse and distribution center, a Business Technology Center and corporate offices. The facility consists of approximately 450,000 square feet of warehouse and distribution center space and 125,000 square feet of office space. We own a total of 45 acres of land at the Vernon Hills site, of which approximately 11 acres are vacant and available for future expansion.

     We have executed various operating lease agreements, primarily for sales office facilities in the Chicago metropolitan area. The lease agreements generally provide for minimum rent and a proportionate share of operating expenses and property taxes, and include certain renewal and expansion options. The following table summarizes these lease agreements and the related financial commitment:

     We are obligated under a lease through 2003 for a combined 104,000 square foot office and warehouse facility in Buffalo Grove, Illinois, that previously served as our main facility and is currently unoccupied.

Item 3.      Legal Proceedings.

     The Company is not currently party to any material legal proceedings.

Item 4.      Submission of Matters to a Vote of Security Holders.

     There were no matters submitted during the fourth quarter of 2002 to a vote of security holders.

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PART II

Item 5.    Market for Registrant’s Common Equity.

     The following table sets forth for the periods indicated the high and low sales prices for the Company’s common stock, which is traded on The Nasdaq Stock Market® under the symbol “CDWC”. These quotations were obtained from Nasdaq, and have been adjusted to reflect the two-for-one stock split paid in the form of a stock dividend on June 21, 2000 to common shareholders of record on June 14, 2000. We believe that as of March 13, 2003 there were approximately 25,013 beneficial owners of the Company’s common stock. Except for distributions prior to May 25, 1993, the date of termination of our election to be taxed as an S Corporation, we have neither declared nor paid any cash dividends on our common stock. We currently intend to retain earnings for use in the operation and expansion of our business and therefore we do not anticipate paying cash dividends in the foreseeable future, however, we continue to review this policy on an annual basis.

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ITEM 6.      Selected Financial Data

CDW Computer Centers, Inc. and Subsidiaries
Selected Financial and Operating Data
(in thousands, except per share and selected operating data)