Good morning. My name is Amanda and I'll be your conference operator for today's call. At this time, I would like to welcome everyone to the CDW 2014 Second Quarter Earnings Conference Call. All lines have been placed in a listen-only mode to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions) I'd like to remind you that today's conference is being recorded. If you have any objections, please disconnect now. It is my pleasure to turn the call over to CDW's Chairman and Chief Executive Officer, Tom Richards. Mr. Richards, you may begin your call.

Thank you. Good morning. It's great to be with you today to report another quarter of strong results. Joining me is our CFO, Ann Ziegler; our Chief Legal Officer, Chris Leahy; and our VP of Investor Relations, Sari Macrie. We will follow our usual format where I provide a high-level overview of our performance strategic progress and Ann provides a more detailed review of our financial results. After that we will open it up for some questions. But before we begin, Sari will read the company's Safe Harbor disclosure statement.

Thank you, Tom. Good morning everyone. Our second quarter 2014 earnings release was distributed this morning and is available on our website along with supplemental slides that you can use to follow along with us during the call. I would like to remind you that certain comments made in this presentation are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Those statements are subject to risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks and uncertainties is contained in the Form 8-K we furnished to the SEC today and in the company's other filings with the SEC. CDW assumes no obligation to update the information presented during this webcast. Our presentation also includes certain non-GAAP financial measures. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation charts in the slides for today's webcast, as well as in our press release and the Form 8-K we furnished to the SEC. Please note that all references to growth rates or dollar amount increases in our remarks today are versus the comparable period in 2013. The number of selling days for the second quarter and first six months are the same in both 2014 and 2013, so there is no difference in growth rates for the average daily sales and reported sales. A replay of this webcast will be posted to our Investor Relations Web site, investor.cdw.com by this time tomorrow. I also want to remind you that this conference call is the property of CDW and may not be recorded or rebroadcast without specific written permission from the company. And with that, let me turn the call back to Tom.

Thanks, Sari. As I mentioned earlier, second quarter results were strong and I am pleased to report that we reached all time records for three key financial metrics. Net sales rose 11.8% to $3.1 billion, delivering the first $3 billion plus quarter in our 30-year history. Adjusted EBITDA increased 16.3% to an all time high of $247 million and non-GAAP earnings per share increased 45.6% to $0.67. These results reflect the combined power of our diverse customer channels, the benefit of our full suite of offerings that address customer priorities across the IT landscape, and ongoing success in executing our three part strategy. Our nearly 4% increase in sales was driven growth across all of our customer channels, ranging from a low of 6% to a high of 25%. On a segment basis, corporate was up 7.7% and public was up 17.5%. In corporate, our medium and large business increased nearly 7% and small business was up 14%. Public segment growth was once again led by education which delivered excellent performance with sales up 25%. Education results reflected both continued exceptional performance in K-12 and low double-digit growth in higher Ed. Government sales increased 5.9% as federal sales returned to low single-digit growth and state and local continued to deliver low double-digit growth and healthcare was up nearly 18%. Our other net revenues which represents our advanced technology services and Canadian operations increased 11.9%. Advanced technology services delivered high single digit growth. Canadian sales were up in the low-teens in U.S. dollars and nearly twice that rate in local currency. As anticipated, customer priorities in the quarter remained squarely focused on client devices. Notebooks, laptops, tablets and desktops. Once again driven by continued strong demand for Chromebook and K-12 and PC refresh as customer address the expiration of XP support…

Thanks, Tom. Good morning, everyone. As Tom indicated, our second quarter, financial results reflect CDW's ability to deliver a full suite of solution offerings that address customer priorities across the IT landscape, the power of our diverse customer channel and the ongoing success of our three part strategy. They also reflect the progress we are making against our financial strategy to drive strong cash flow, delever our balance sheet and deliver double-digit earnings growth. Let me begin with our P&L. If you have access to the slides posted on line, it will be helpful to follow along. I am on Slide 7. Top line growth was excellent this quarter with net sales of $3.11 billion, 11.8% higher than last year on both a reported and average daily sales as we had the same number of selling days in both the second quarter of 2014 and 2013. Average daily sales grew $48.5 million. On an average daily sales basis, sequential sales were up 15.3% versus Q1 2014, which is well above normal seasonality. Gross profit for the quarter increased 10% to $496.9 million. Similar to Q1, gross margin remained under pressure with our gross margin at 16%, down 20 basis points from last year's Q2. The decline was primarily due to the ongoing impact of both mix and pricing pressure from growth in lower margin to more transactional products. Reported SG&A, including advertising expense, was $308.7 million, up just 3.6% over last year. Advertising expenses remained fairly constant as a percentage of sales, increasing $3.2 million in the quarter versus last year. We ended the quarter with 7151 coworkers, up 184 workers since the end of 2013, and up 341 since the end of last year's second quarter. Annualized sales per coworker were $1.75 million, up 7% over Q2 2013. Our…

(Operator Instructions) Our first question comes from Ben Reitzes from Barclays. Your line is now open.

Can you talk about drivers -- and by the way, Ann I appreciate that color on the cash flow, so that’s still what I was going ask. I am going to ask about drivers for the second half. You mentioned that PCs could temper a little bit. But I was wondering what you thought about a potential server cycle as a driver. And also can you talk about the sustainability of the public revenue streams that have been -- that really were higher than expected in the quarter? And then particularly touch on that eRate program and how that impacts your business. Thanks.

So there is kind of three parts to that, Ben. First on the PC refresh. I think we are fairly comfortable that it's going to continue through the end of the year and the comment on the moderation in part is just the number of customers that have already done the refresh. You have got some interesting comps going on for K-12, to say the least, during the second half of the year. But we do, I think to user your term, we do expect PC refresh to continue to be a driver for the remainder of 2014. As far as the server business and for that matter our overall solutions business, we would -- I do think there is a mindshare issue that goes inside of both our sellers and customers when it comes to how many big projects can I take on at one point in time. We are a little bit of encouraged by the end of the second quarter increase in some of our solutions business, including servers and how that started in July. We will see if that remains. But a big wildcard for us I think this second half of year will be what happens with federal. And because, as I have said, we had our first positive growth quarter in a while, we are very excited about that and we are seeing, Ben, some increased, what I will call sales activity in the federal channel. You know quotes, RFPs requested, contract meetings, all of those tend to make you believe we are going to see some uptick and that could influence a lot the second half of the year. But you know as you know, we have had six or seven quarters of tough (indiscernible). So that’s a little bit of a wildcard.…

Our next question comes from Bill Shope from Goldman Sachs. Your line is open.

I guess first question. Could you give us a little bit more color on your thoughts around the refinancing strategy, both today's announcement and your thoughts on the future? And I guess related to that, the debt reduction definitively end at three times leverage or with refinancing presumably becoming through the call dates after that, or do you still think you may have some capacity beyond that? That would be my first question. I have a second question after that.

Yes. I am not sure I understood the last part of that question but let me. The refinancing strategy is, you know as we approach the early call dates and you begin to look out at where interest rates might move, it just makes sense to take up a piece of the risk off of the table by doing a piece of the refinancing today. So that’s what we did. We will continue to monitor the marketplace and as it makes sense, opportunistically begin to refinance the remainder of the debt that’s outstanding and become callable in April of next year.

Okay. And I guess the question I has asked, the second question, was really the question we ask quite often. Which is how to think about your capital allocation strategy after you hit three times leverage. I know you have several options buybacks, dividends, potential for more deleveraging. But how are you thinking about that today given the environment we are in.

Absolutely. So as we have indicated, we will revisited our dividend annually. So that will come up because we are about to anniversary the first dividend we paid. But then on top of that when we get to three times leverage, we will revisit the strategy more globally, looking at potentially a significant step function change in the dividend as well as initiating stock buyback. But all that’s going to depend on the marketplace at the time, tax policy, interest rates etcetera.

Okay. Great. And then my final question would be, on how to think about absolute OpEx trends through the back half of the year. You gave a ton of details on the call, I am not sure I got them all but in particular, if you could focus on how we should think about the absolute OpEx trends over the next two quarters and particularly how variable comp effects that given the stronger than expected revenue performance.

Yes. I think the best way to think about it is, that we expect our OpEx to grow, or adjusted SG&A to grow more in line with sales for the second half of the year as we continue to add coworkers through the year that OpEx growth, and we also have some initiatives that were simply funded or some funds to be invested in second half of the year. So as you think about the second half, you would expect OpEx adjusted SG&A to grow more in line with top line growth.

Our next question comes from Matt Sheerin with Stifel. Your line is now open.

Just wanted to focus on your services. Tom, you gave some pretty good examples of some of the solutions that you are providing for both small and large customers. If you look at your infrastructure, your network operations centers and data centers, what's your capacity look like and are you expecting to expand that? And as a related question, could you talk about CapEx plans for the year.

Okay. So let me start with the second quarter first. You know we typically spend about 0.05%, I think in CapEx spending for the year. I think we are going to be in that range. We have been in the, I think what, $40 million to $50 million range. We are pretty steady eddies when it comes to spending on CapEx. We do have some projects interesting enough, that Ann alluded to, that are important drivers of growth in our cloud business that we will be working on during the second half of the year and delivering. As far as the first question about capacity, I don’t see any capacity constraints. When it comes to expanding our services business and in particular where you would think about that is in our managed services and some of our hosting strategies. And we feel very comfortable we have the capacity to meet whatever demand is going to be in the marketplace. You are instinctively on point, so to speak. We are getting increasing demand from customers to help them think about infrastructure as a service or remote network management, managed services as the hybrid IT blueprint continues to be the prevailing discussion point with most of our customers.

Okay. That’s helpful. And then looking at your vertical strategy which is obviously benefitting the growth. Could you talk about any other areas? You talked about financials, are there any other verticals that you are looking at and potentially building out as a sub-sector of one of your other segments?

Not at this point. We still consider the finance and the legal verticals to kind of be in their embryonic stage if I would say it that way. You know we just moved them into the MedLar sales channel, kind of graduating from the pilot phase. And so we will concentrate on those right now and getting those into being full productive sales channels. And then -- that doesn’t mean we aren't thinking about it, but I don’t think I am at a point where I could share anything this specific. But I think another point is, we do continue to subs-segment, as I alluded to. And that is a huge benefit because as you might imagine, even inside of healthcare or finance, your ability to get underneath that segment level and provide unique solutions is a real asset to customers.

Our next question comes from Brian Alexander with Raymond James. Your line is now open.

I just wanted to clarify the growth outlook for 2014. So based on what you see today it sounds like CDW, you expect CDW to grow 8% to 9% for the year versus I guess 11% growth in the first half. So just trying to back into the second half growth expectation of around 6% to 7%, just to make sure that I heard that right. And then I have a follow-up.

Yes. It's going to be, if you just think about it, just do the 400 to 500 on top of the slightly above 4. But I did allude, the PC refresh continues, Brian, stronger than I think. It could be slightly above the 4 number, which could than push us a little higher than the number you talked about.

And then just on the slower growth in client devices. Is that based on sales trends that you are experiencing or is it more of an expectation based on customer conversations or just intuition based on how strong it has been in the first half?

Probably the correct answer is, all of the above that you mentioned. It's a little bit some looking at the math and knowing the overlaps some of those segments have. Some of it is just looking at the rest of the market that has the opportunity to do that. Although I would tell you that, we haven't seen it moderate yet in a meaningful way but your instinct would tell you, by the time you get to the end of the year, you are going to see some moderation in that growth rate.

Okay. And then just a final clarification for Ann on the margins. So if I heard your comments, it sounds like gross margin you think stays around 16%, OpEx grows in line with revenue. And so if we kind of look what that means for adjusted EBITDA margins, around 7.5% for the year, flattish year-over-year in the third quarter but down in Q4. Is that right?

Yes. I think you have it right conceptually. I mean we don’t provide that specific level of guidance. We certainly expect to hit our medium term target in the mid-7% range on a full year basis. I want to be clear, we don’t expect to hold the margin at the 8% range. We delivered this quarter with OpEx growing more in line with sales in the back half of the year. Right. It's certainly going to be lower than it was in Q2. And in Q4 in particular, because of some of the overlaps, we expect to be below the medium term annual target.

Our next question comes from Rich Kugele with Needham. Your line is open. Rich Kugele - Needham & Company: So, two questions. First, you talked about continued pricing pressure especially on the transactional products. I am just interested, in this rising demand environment here domestically, what do you think is the driver for that? Is there not enough business going around for some of these small regional players that you are competing against or are they also trying to gain share? Are they trying to compensate for other areas? Any additional color on the price competition. Then I have a follow-up.

Well, I think part of it, Rich, is driven by as certain parts of the IT infrastructure get commoditized. Pricing pressures always becomes the bigger and bigger part of the discussion. And I think -- I don’t know if I could comment on other peoples strategies but I do know that when there is an opportunity in the marketplace and people feel like they need to either maintain their share or protect their share, that pricing tends to be the strategy some people run to. So we have experienced that now for a period of time. I am going to say, it feels like the last 18 or 24 months on the transaction part of the business. Not quite as much on the solutions side but more on the transaction side. And the connective tissue there is, we just expect that part of our business to continue to grow and therefore you are going to continue to see that pricing pressure. Rich Kugele - Needham & Company: Okay, and then just on the Chromebook tightness. Do you feel you've got a diverse supply of those in terms of vendors? What has been the vendor response when you have relayed the demand issue that has led you to stock some extra product?

Well, the answer to your first question is, yes. That’s one of the great benefits of a company like CDW, is the diversity of options. That also is a great operating benefit for us because it enables us to sent a pretty strong message about our ability to consume those devices. And I will tell you, the partners have been very good. I think one of the things that has helped is our ability to give them specific forecast and our confidence level in those forecast. And when you can have that kind of dialogue, it tends to be a pretty good equation. Rich Kugele - Needham & Company: How long do you expect that tightness to continue?

I don’t know that I could comment on that. Quite honestly, I really don’t know enough about the back end of the manufacturing process. All I know is, we want to make sure that we have the product for our customers and that’s why we were aggressive in building a stock position.

Our next question comes from Jayson Noland from Robert W. Baird. Your line is now open.

Tom, a question on taking the growth rate to 400 to 500 above the IT market growth from 200 to 300. That implies share gain. What is the primary driver of that? Is it mostly a function of end market exposure for CDW?

Jayson, I am sorry, what was the last part of your question? I didn’t quite -- what's the...

Why are you gaining share? Is it a function of where your end market exposure is?

Yes. I would say it's a couple of things. One is, you know we have been working on a number of different initiatives that are beginning to kick in. You heard me talk about the geographic realignment in small business. I think a second part of it is, we are anticipating federal will continue to return to growth and we are looking at some other initiatives and some of the things we talked about earlier, the success of our vertical markets. So I think all of those have been part and parcel of why we have experienced the share gain in both existing customers, which I think it's important to keep this to mind, that when we talk about share gain, it's both within share of wallet inside of an existing customer and then acquiring new customers. And as I have, I think mentioned on a couple of these calls, cloud computing and some of the other initiatives that we have implemented in small business have been huge factors in helping us acquire new customers.

Okay, thank you. And a follow-up on data center. I think you said storage and server were a little soft. What are you seeing in the networking market right now?

Network was pretty good. It wasn’t anywhere near the client tailwind but the network business has been pretty consistent for us. Within the network business, I think alluded to this in my comments. So wireless networking continues to be a pretty area of strong interest by our customers. I think a lot of that has to do with, they deal with kind of the mobile world, the deal with maybe Ethernet kind of landline restrictions when it comes to capital investment. The wireless part of the network continues to be a growth area.

Our next question comes from Katy Huberty from Morgan Stanley. Your line is now open.

As you noted, hardware growth significantly above software growth. Is there any historical relationship whereby strong hardware sales will lead to an acceleration in software growth in coming quarters? Or is the PC dynamic less likely to drive software and services attach?

Katy, I think the answer is, in some parts of the hardware world, the answer is yes. Like in storage and that implication on storage software. But with more of the cloud-base solutions, they are almost independent growth driver in the business, not necessarily tied to a particular hardware refresh. So we saw, as I think I alluded to, we saw growth across our virtualization practice, our security software practice and obviously our cloud-based solution practice. And I don’t know that those were driven as much by hardware as just independent decisions inside the business.

Okay, got it. You made a couple of comments about federal returning to growth in the second quarter. We are heading into the fiscal year-end for federal. What are your expectations as it relates to any budget slash in the September quarter?

Katy, I am so hesitant to give federal expectations based on what we have been through in the last couple of years. I do feel, if you kind of look at happened, civilian really had a strong quarter and DOD started to see the increased activity. That would suggest to you increased momentum. But I think I would careful suggesting we will have a normal, if you can say that word anymore, normal end of the year federal budget flush. But activity would suggest continued growth.

(Operator Instructions) Our next question comes from Bhavan Suri with William Blair. Your line is open.

This is (indiscernible) on behalf of Bhavan. And I just kind of wanted to ask a question about the geographic alignment success you saw in small business. I was just kind of wondering if you really change anything in your go to market strategy there and kind of how you see this progressing in the back half of the year.

Well, yes, we did. One of the things we have been working on is the benefit of geographic alignment to the small business team, I tried to call it out in the comments. It now gives us the ability, since our partners are generally aligned geographically, to have the small business team participate in in-market technology, seminars. In-market technology, sales opportunity. That’s a huge benefit for them because it really become the cost effective way to get your message to multiple customers at a single time. When they were not geographically aligned with MedLar, it made it hard for them to take advantage of that. So I don’t want to suggest that just that single initiative drove the improved performance. But it was clearly a contributor in the go to market -- excuse me, the success of the small business.

I am showing no further questions at this time. I would like to turn the call back to Tom Richards for further remarks.

Okay. Thank you. Thanks again to everybody for your time today. We are thrilled with the quarter. Obviously, the growth rates and the profitable performance are important parts of what we expect of ourselves. And we are excited about what the second half of the year suggests for us. So as always, if we can help your companies solve some of these technology problems, please let us know. And enjoy the rest of your summer and we will see you in the fall. Thanks, everybody.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.