<PAGE>  1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K

X    ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

_    TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE  ACT OF 1934  FOR THE  TRANSITION  PERIOD  FROM  _____________  TO
     -------------

                         Commission file number 0-21796

                           CDW COMPUTER CENTERS, INC.
             (Exact name of registrant as specified in its charter)
            Illinois                                36-3310735
  (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)               Identification No.)

         200 N. Milwaukee Ave., 
         Vernon Hills, Illinois                        60061
(Address of principal executive offices)             (Zip Code)

       Registrant's telephone number, including area code : (847) 465-6000
       -------------------------------------------------------------------
          Securities registered pursuant to Section 12(b) of the Act :

Title of each class                    Name of each exchange on which registered
       None                                              N/A

         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
                            -----  

The  aggregate  market  value of the Common Stock held by  non-affiliates  as of
March 29, 1999 was approximately $1.360 billion, based upon the market price per
share of $63.13.         

As of March 29, 1999,  the  registrant  had  21,540,991  shares of Common Stock,
$0.01 par value, outstanding.

<PAGE> 2

                       DOCUMENTS INCORPORATED BY REFERENCE


Portions of the following documents are incorporated by reference into the parts
of this Form 10-K designated to the right of the document listed.

Incorporated Document                          Location in Form 10-K

1998 Definitive Proxy Statement, to be         Part III, Items 10, 11, 12 and 13
filed pursuant to Regulation 14 A not
later than April 30, 1999.

An Index to Exhibits appears at pages          Part IV, Item 14
20 - 22 herein  





















                                        i

<PAGE> 3

                           CDW COMPUTER CENTERS, INC.
                          1998 FORM 10-K ANNUAL REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 1998
                                      INDEX


                                     PART I                        10-K Page No.

Item 1.        Business  . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 2.        Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Item 3.        Legal Proceedings .  . . . . . . . . . . . . . . . . . . . . . .9

Item 4.        Submission of Matters to a Vote of Security Holders . . . . . . 9


                                     PART II

Item 5.        Market for Registrant's Common Equity and Related
               Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . 10

Item 6.        Selected  Financial  Data . . . . . . . . . . . . . . . . . . .11

Item 7.        Management's Discussion and Analysis of Financial 
               Condition and Results of  Operations  . . . . . . . . . . . . .12

Item 8.        Financial Statements and Supplementary Data . . . . . . . . .  19

Item 9.        Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure . . . . .. . . . . . . .19


                                    PART III

Item 10.       Directors and Executive Officers of the Registrant . . . . . . 19

Item 11.       Executive Compensation . . . . . . . . . . . . . . . .. . . . .19

Item 12.       Security Ownership of Certain Beneficial Owners
               and Management . . . . . . . . . . . . . . . . . . . . . . . . 19

Item 13.       Certain Relationships and Related Transactions . . . . . . . . 19


                                     PART IV

Item 14.       Exhibits, Financial Statement Schedule and Reports
               on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . .20

Signatures  .  .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23



                                       ii

<PAGE> 4
                                     PART I
Item 1.       BUSINESS.

GENERAL

     CDW Computer Centers, Inc. and its subsidiaries  (collectively 'CDW' or the
'Company') is a leading direct marketer of 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/communication
products and accessories through  knowledgeable  telemarketing account managers.
On May 27, 1998, the Company formed CDW Government, Inc. (CDW-G), a wholly owned
subsidiary.  CDW-G sells  personal  computers  and related  products and focuses
exclusively on serving government and education accounts. Sales of products that
utilize,  or are  compatible  with,  Microsoft  Windows,  Windows  NT and MS-DOS
operating  platforms  account for  substantially all of the Company's net sales.
The Company offers popular brand name microcomputer products from Apple, 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 information technology 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  the  Company's  direct
marketing  format.  The Company  markets to  prospective  customers  through its
catalog and other direct  mailing  programs,  through  national  advertising  in
computer magazines and through electronic commerce via the Internet.  During the
year ended  December  31,  1998,  the  Company  serviced  approximately  634,000
customers.  The  Company  continues  to focus on  generating  repeat  sales from
existing  customers while attracting  sales from new customers.  The Company has
consistently  maintained  a high annual rate of repeat  purchases  from  current
customers by offering  excellent  customer service and competitive  pricing on a
broad range of microcomputer  products. The Company enhances repeat purchases by
offering add-on and replacement  products through its experienced  telemarketing
account  managers  who  are  knowledgeable  about  a  customer's  needs,  and by
enhancing  product  offerings  such  as  networking  products  through  targeted
catalogs to such users.

THE MICROCOMPUTER PRODUCTS INDUSTRY EVOLUTION

     The microcomputer  industry has evolved as a result of, among other things,
the development of new  technologies  that have been 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.

     The sophistication and value  consciousness of the Company's customer base,
combined with the evolution of industry standards for  microcomputers,  has also
resulted in heightened end-user interest in, and acceptance of,  microcomputers,
peripherals  and software  which use the  Microsoft  operating  platform and are
manufactured by high quality manufacturers. In addition, the intense competition
among  manufacturers  has generally  reduced  prices and increased the number of
microcomputers  and related products being used by businesses and sold by direct
marketing  organizations  such as CDW.  The  Company  believes  that its  direct
marketing format,  which promotes the sale of high quality,  brand name products
at competitive prices and a high level of technical  service,  is well suited to
serve an increasingly sophisticated and value conscious customer base.

                                       1

<PAGE> 5

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,
Internet  retailers,  corporate  resellers  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.  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 and Internet commerce industries 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.  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 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.

     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 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.

THE CDW PHILOSOPHY

     The  Company  adheres  to a central  philosophy  known as the CDW CIRCLE OF
SERVICE.  The philosophy is based upon the premise,  promoted by its management,
that "People Do Business  With People They Like." The CDW CIRCLE OF SERVICE is a
graphic  reminder to the Company and its  personnel  that good service  leads to
good experiences and increased sales, and,  alternatively,  that bad experiences
lead to lost sales and job uncertainty.

BUSINESS STRATEGY

     The  Company's  business  strategy is to be a high  volume,  cost-efficient
direct  marketer  of  a  broad  range  of  brand  name,   competitively  priced,
microcomputer  products  and to provide a high level of  customer  service.  The
Company believes that the following  factors are of principal  importance in its
ability to implement this business strategy:

     Breadth  and  Depth  of  Selection.  The  Company  offers  a wide  range of
products,  providing its customers with the convenience of one-stop shopping for
their  microcomputer-related  needs. The Company carries brand name products and
regularly reviews and modifies its mix of product offerings.

                                       2

<PAGE> 5

     Competitive   Pricing.   The  Company   believes   that  its  high  volume,
cost-efficient direct marketing format allows it to maintain a pricing advantage
over many other microcomputer product resellers.  The Company utilizes a pricing
model which allows it to efficiently  pass on pricing  changes as they occur and
provide its customers with the lowest possible price.

     Sales and Marketing.  The Company uses  telemarketing  account  managers to
respond to customer inquiries generated by direct marketing in personal computer
magazines,  periodic  catalog  mailings and Internet  marketing  activities.  In
addition to its direct marketing  efforts,  the Company uses certain other sales
strategies,  including outbound calling through its Corporate  Development team,
to expand and enhance its base of active customers. The Company's sales function
is organized to support  customers  requiring  unique  service levels or product
lines.

     Customer  Service  - Custom  Configuration  and  Technical  Support.  As of
December 31, 1998, the Company custom configures  approximately  3,000 units per
week and ships the  majority  of its  orders  the day the order is  placed.  The
Company  employs a trained  technical  staff that is  available  by telephone to
assist the customer should  technical  problems occur in order to reduce product
returns  and  increase  customer  satisfaction.  The Company  believes  that its
commitment to service at the time of sale and after the purchase maximizes sales
and encourages repeat customers.

     Information Technology. The Company uses 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.

     Effective Inventory Control. The Company's management  information systems,
"just-in-time"  purchasing  system,  RF-based cycle  counting  system and use of
vendor stock  balancing and price  protection  programs allow it to minimize its
investment  in  inventory,  reduce  inventory  discrepancies  and  the  risk  of
obsolescence while meeting customer needs. These systems resulted in the Company
achieving approximately 24 inventory turns during 1998.

     High Quality Personnel. The Company strives to attract, retain and motivate
high quality  personnel and provides its  coworkers  with  financial  incentives
designed to maximize  performance and productivity.  The Company and Mr. Krasny,
its majority shareholder, Chairman and CEO, have instituted short-term incentive
programs and stock-based compensation programs to reward and motivate all of the
Company's coworkers.

                                       3
<PAGE> 7

MERCHANDISE

     The  Company  offers   microcomputer   products   including   hardware  and
peripherals, software, networking and communication products and accessories for
use with microcomputers based on a variety of operating platforms. The Company's
just-in-time  purchasing system and aggressive inventory management allows it to
limit its on-hand inventory and ship orders generally on a same-day basis.

     The  following is a listing of selected  product  manufacturers  by product
category :

<TABLE>
<CAPTION>


     PRODUCT CATEGORIES                           SELECTED PRODUCT MANUFACTURERS
     ------------------                           ------------------------------
<S>                                   <C>                      <C>                      <C>
HARDWARE AND PERIPHERALS: 
Notebook and Laptop   Computers       3Com                     IBM                      Okidata
Desktop Computers and Servers         3M                       Imation                  Quantum
Printers                              Acer                     Infocus                  Seagate
Data Storage Devices                  Adaptec                  Intel                    Simple
Video Products                        APC                      Iomega                   SMC
Add-on Boards/Memory                  Apple                    Kingston                 Sony
Input Devices                         Belkin                   Kodak                    TDK
Multi-Media                           Canon                    Lexmark                  Tectronix
Net/Comm Products                     Cisco                    Logitech                 Toshiba
Other Accessories                     Compaq                   Magnavox                 Viewsonic
                                      CTX                      Maxell                   Visiontek
                                      Epson                    Memorex                  Western Digital
                                      Fujitsu                  Microtek
                                      Hewlett-Packard          NEC

SOFTWARE:
                                      Adobe                    Lotus                    Seagate
                                      Computer Associates      Microsoft                Symantec
                                      Corel                    Novell

</TABLE>


     The Company  continually seeks to expand and improve its relationships with
manufacturers  as well as increase the number of products which it is authorized
to sell.

     The Company offers a wide variety of software  packages in the business and
personal  productivity,  utility and  language,  educational  and  entertainment
categories.  The Company also offers a broad range of microcomputer accessories,
including  computer-related  items  and  supplies  such  as  diskettes,  printer
products, pointing devices, digital cameras and connectors.

PURCHASING AND VENDOR SELECTION; INVENTORY MANAGEMENT

     The Company  believes  that  effective  purchasing  is a key element of its
business  strategy of providing name brand products at competitive  prices.  The
Company's  purchasing staff works to identify reliable high quality suppliers of
products,  then actively  negotiates  to decrease the Company's  cost and expand
vendor support programs,  permitting the Company to improve the  competitiveness
of  selling  prices of its  products.  The  Company  seeks to  establish  strong
relationships  with its vendors,  and employs a policy of paying  vendors within
terms stated and taking advantage of all appropriate discounts.

     During  1998,  CDW  purchased  approximately  60% of its  merchandise  from
distributors and aggregators and the balance direct from  manufacturers,  all of

                                       4

<PAGE> 8

which ship  directly  to the  Company's  distribution  facility.  The Company is
generally  authorized  by  manufacturers  to sell via  direct  marketing  all or
selected 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 support programs,  such as purchase or
sales rebates and cooperative advertising reimbursements. 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.  Vendor  support  programs  are at the
discretion of the  manufacturers and usually require achieving a specified sales
volume or growth rate to qualify for all, or some of the incentive program.

     For the year ended  December 31,  1998,  Ingram  Micro/Ingram  Alliance and
Merisel  were  the  only  vendors  from  whom  purchases  exceeded  10% of total
purchases.  Additionally,  in 1998  Compaq and  Hewlett  Packard  products  each
comprised  more  than  10% of  total  Company  sales.  The  loss of any of these
vendors, or any other key vendors, could have an adverse effect on the Company.

     The Company  believes  that the Chicago  metropolitan  area is an excellent
location for its  business as it is  centrally  located for purposes of shipping
products throughout the United States and provides quick access to manufacturers
and same day access to its principal  distributors  and  aggregators,  including
Ingram  Micro/Ingram  Alliance,  Merisel,  Tech  Data,  and  Micro  United.  The
relocation of key distributors utilized in the Company's just-in-time purchasing
model could adversely impact the Company's results of operations. Although brand
names and  individual  products are  important to the  Company's  business,  the
Company   believes  that   competitive   sources  of  supply  are  available  in
substantially all of the merchandise categories the Company carries.

     CDW also applies its proprietary information technology systems to the task
of managing  its  inventory.  At December 31, 1998,  the Company  maintained  an
investment in inventory of approximately $64 million with approximately  $72,000
of  inventory  on hand  over 90 days  old.  The  Company  turned  its  inventory
approximately 24 times during 1998.

MARKETING AND ADVERTISING ACTIVITIES

     The  Company  utilizes  a variety of  advertising  and  marketing  media to
attract and retain customers, including national advertising in computer related
publications, catalogs and certain other direct marketing activities, as well as
electronic  marketing  via the  Internet.  In 1998,  the Company  launched a new
national  branding  campaign  which  includes  national print media and national
cable  television  advertisements.  Due to its  relationships  with its  product
suppliers and others,  a substantial  portion of its  advertising  and marketing
expenses are reimbursed through cooperative advertising  reimbursement programs.
These  cooperative  advertising  programs are at the discretion of the Company's
vendors  and  are  typically  tied  to  certain  purchasing  volumes  and  other
commitments required by the Company. The Company's approach to its marketing and
advertising  activities is proprietary in nature, as is its strategy in managing
its files of current, prior and prospective  customers.  In order to measure the
effectiveness of its marketing  activities,  the Company tracks responses to its
various  efforts  by a variety  of means.  This  information  is used to further
refine its strategy and develop more effective programs in the future.

www.cdw.com

     The Company has an established Internet web site, known as www.cdw.com,  to
capitalize  on the  growing  interest  and  opportunity  created  by  electronic
commerce.  The web site includes many advanced features to attract new customers
and produce sales,  including more than 40,000  computer  products to search and
order on-line,  advanced search  capabilities,  product  specifications  on over
10,000 products,  product  availability and pricing. It also offers side-by-side
product  comparisons,   links  to  product  reviews,  newsworthy  announcements,
personalized  access and customized two-way interaction that allows for checking
order  status at will.  In  addition,  the Company  has,  through its  excellent
relations  with vendors,  arranged for links between  vendors' web sites and the
Company's. The Company believes the website provides information and convenience
for its  customers,  while also  serving as  another  source for new  customers.
During 1998 the Company generated $60.5 million of unassisted sales over its web
site, of which $20.6 million were generated in the fourth quarter.

                                       5

<PAGE> 9

SALES ACTIVITIES AND ORDER FULFILLMENT

     The  Company's  success  is due in  part  to the  strength  of its  account
managers who respond to customer telephone  inquiries generated by the Company's
advertising and marketing efforts, and contact customers.  The Company's account
managers  are  trained  in  Company  systems  and   philosophies,   are  product
knowledgeable  and  motivated  to  maximize  sales and  provide  high  levels of
customer  service.  All account  managers are graduates of CDW  University,  the
Company's proprietary sales training program. The program includes four weeks of
classroom  training  followed by several weeks of sales experience in one of the
Company's retail showrooms.  CDW seeks to build customer  relations by assigning
each  customer to the account  manager who first  services  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 sales 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  the  Company's
customer   purchase  history.   Computer   processing  of  orders  is  performed
immediately  following  the  placement  of the order and upon  receipt of credit
approval.  The Company ships most credit  approved orders received by 9:00 p.m.,
exclusive of orders for products  not in stock or subject to  allocation  by the
manufacturer,  on the day the order was received.  Orders are shipped by Federal
Express,  Airborne  Express,  RPS,  Chicago  Messenger  Service,  United  Parcel
Service,  U.S. Mail,  common carrier or any other acceptable manner requested by
the  customer.  The  Company  charges  customers  for  shipping  but  may  offer
promotional shipping programs from time to time. The average order size was $745
in 1998 and $704 in 1997.

     CDW account  managers are  generally  compensated  pursuant to a commission
schedule  based upon the gross profit  generated by them.  CDW 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.  The Company's  account managers have the opportunity to
achieve  relatively  high  compensation   levels  and  have  historically  shown
increased productivity as training and experience levels increase.

CUSTOMERS

     CDW  currently  maintains  a  database  of  over  3.1  million  active  and
prospective names of which approximately 634,000 were serviced by the Company in
1998. The Company believes that its customers consist principally of businesses,
government  institutions  and  home  business  users,  which  tend  to  purchase
higher-end  equipment.  For the year ended December 31, 1998, sales to business,
government and  institutional  customers  accounted for approximately 87% of the
Company's net sales,  although consumers account for a greater proportion of the
total names on the Company's database.

     CDW's customers are located  principally  throughout the United States.  In
1998,  approximately  21% of the Company's net sales were  generated by sales to
Illinois residents, approximately 29% were generated to residents of the eastern
United  States,  approximately  16% were  generated by sales to residents of the
southern United States,  approximately  18% were generated by sales to residents
of the western  United States and  approximately  15% were generated by sales to
residents of the Midwestern  United States (other than  Illinois).  In addition,
approximately 1% were sold to customers outside the United States.

                                       6



<PAGE> 10

CUSTOM CONFIGURATION AND TECHNICAL SUPPORT

     The Company  offers custom  configuration  which  permits  customers to add
accessories,  load software or request a custom setup of systems  purchased from
the Company.  During 1998, the Company's custom  configuration  center processed
approximately  119,000 custom  configured units. The Company employs a technical
staff  that  is  trained  and  maintains  the  highest  levels  of  professional
certification  from  manufacturers  including that of "Novell  Certified Network
Engineer" and "Certified  Microsoft  Engineer".  The Company's trained technical
support  personnel  are  available  by  telephone  to assist the  customer  with
technical  problems or questions in order to reduce product returns and increase
customer satisfaction. CDW has developed a proprietary customer service tracking
system to ensure that  customer  initiated  service  requests  are  responded to
rapidly.

INFORMATION TECHNOLOGY SYSTEMS

     CDW has installed and operates  customized  information  technology systems
based  upon  an  IBM  AS/400,   Novell,   Microsoft  NT  and  other   platforms.
Collectively,  these systems allow for centralized  management of key functions,
including inventory and accounts receivable  management,  purchasing,  sales and
distribution,  and the  preparation  of daily  operating  control  reports which
provide  concise and timely  information  regarding key aspects of the business.
The Company's proprietary  information  technology systems enable the Company to
enhance its  productivity,  ship customer  orders on a same-day  basis,  respond
quickly to changes in its industry and provide high levels of customer service.

     The Company's  success is dependent on the accuracy and proper  utilization
of its information  technology  systems,  including its telephone  systems.  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 information  technology systems.
In that regard, the Company anticipates that it will, from time to time, require
software and hardware upgrades for its present  information  technology systems.
In  addition,  the ability of the Company to adapt its systems to changes in the
competitive  environment  or to  take  advantage  of  additional  automation  is
dependent upon its ability to recruit and retain qualified IT professionals.  If
the  Company  were  unable to develop or  purchase  future  enhancements  to its
information  technology  hardware  or  software,  or continue to hire and retain
qualified IT professionals,  the Company's  operating results could be adversely
affected.  See Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations  for  information  regarding  the impact of the Year 2000
issue on the Company's business.

PERSONNEL AND TRAINING

     At December 31, 1998, the Company employed 1,512 coworkers. Of these, 1,302
were employed at the Company's headquarters in Vernon Hills, Illinois, 52 at the
Company's  retail  showroom in  Chicago,  Illinois,  152 at the  Buffalo  Grove,
Illinois  telemarketing  facility and 6 were  employed at the  government  sales
office in Chantilly,  Virginia.  The Company considers its coworker relations to
be  excellent.   The  Company's  level  of  net  sales  per  coworker  decreased
approximately  6.7% to $1.39  million  for the year ended  December  31, 1998 as
compared to $1.49 million for the year ended December 31, 1997. No coworkers are
covered by collective bargaining agreements.

     CDW emphasizes  the recruiting and training of high quality  personnel and,
to the extent possible, promotes people to positions of increased responsibility
from within the Company.  Each coworker initially receives training  appropriate
for his or her  position  and a complete  CDW  orientation.  This is followed by
varying  levels of  training in  information  technology.  New account  managers
participate in an intensive  four-week long classroom  training program known as
"CDW University,"  followed by hands-on,  face-to-face  showroom training during
which  time  they are  introduced  to the  Company's  philosophy,  systems,  and
products  and  services.  Training  for specific  product  lines and  continuing
education  programs for all account  managers are conducted on an ongoing basis,
supplemented by vendor sponsored  training programs for all account managers and
technical support personnel.

                                       7

<PAGE> 11

INCENTIVE AND REGULAR COMPENSATION ARRANGEMENTS

     Compensation   Arrangements.   The   Company's   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  commission  schedule  which is based upon  aggregate  gross  profit  dollars,
accounts receivable  personnel are eligible for monthly bonuses if late balances
are held below target levels, and operations  personnel are eligible for monthly
bonuses based upon such factors as prompt vendor  returns and order  fulfillment
rates.  The  Company  believes  that  these  incentives  positively  impact  its
performance and profitability.

     Coworker  Incentive  Stock Option,  MPK Stock Option and  Restricted  Stock
Plans.  In  addition  to  regular  compensation,  the  Company,  and Mr.  Krasny
individually,  provide Company  coworkers with additional  long-term  incentives
designed to maximize performance and productivity.  To this end, the Company and
Mr.  Krasny have adopted  various  stock-based  compensation  plans which enable
Company coworkers to share in the success of the Company through appreciation in
the value of the Company's stock.

RETAIL SHOWROOMS

     The Company currently  operates two retail showrooms  allowing customers an
opportunity  to examine  products prior to purchase or to talk directly with CDW
sales or technical personnel.  One showroom is located within the Company's main
distribution facility and headquarters in Vernon Hills,  Illinois, and the other
is located in downtown Chicago,  Illinois.  These showrooms occupy approximately
5,100 square feet each.

     The Company's retail showrooms,  which generated  approximately 5.4% of the
Company's net sales for 1998, inclusive of orders placed by telephone and picked
up at the retail showroom,  provide an environment in which to further train the
Company's account managers before they join its telemarketing department.

TRADEMARKS

     The Company  conducts its business  under the trade names and service marks
"CDW", "Computer Discount Warehouse" and "CDW-G." The Company has taken steps to
register and protect  these marks and believes they have  significant  value and
are important factors in its marketing programs.

ITEM 2.       PROPERTIES.

     The  Company's  primary  location  and  headquarters  is in  Vernon  Hills,
Illinois, and includes its main distribution center,  telemarketing  facility, a
retail showroom and corporate offices. The facility consists of a combined total
of approximately 325,000 square feet of warehouse and office space,  including a
100,000 square foot warehouse  expansion  which was completed in September 1998,
and is located on  approximately  27 acres of land.  In March 1998,  the Company
acquired 18 acres of vacant land  contiguous to the Vernon Hills  facility.  The
Company now owns a total of 45 acres of land at the Vernon Hills site,  of which
approximately  18 are vacant and available for future  expansion.  The Company's
Chicago retail showroom is under lease through the year 2000.

     The Company is obligated under a lease through 2004 for a combined  104,000
square  foot office and  warehouse  facility in Buffalo  Grove,  Illinois,  that
previously  served as its main facility.  In October 1998, the Company  reopened
the office portion of the Buffalo Grove facility as a telemarketing  center. The
Company is attempting to sublease the Buffalo Grove facility and plans to occupy
the office space while it finalizes future long term growth plans for its Vernon
Hills campus. See Note 7 in Notes to Consolidated Financial Statements.

                                       8

<PAGE> 12

ITEM 3.       LEGAL PROCEEDINGS.

     In  December  1998,  the  Company  and  Michael  P.  Krasny,  its  majority
shareholder,  Chairman and CEO, agreed to settle the litigation  brought against
them in 1993 by a former  shareholder,  director  and  executive  officer of the
Company. The lawsuit was related to the Company's redemption of the common stock
held by the former  shareholder in July 1990, and requested  actual and punitive
damages.  Although the Company and Mr. Krasny  believe their actions were honest
and proper and that the  allegations  were  without  merit,  they  agreed to the
settlement of the suit,  whereby all pending litigation was dismissed with a one
time  payment by Mr.  Krasny to the former  shareholder  of  approximately  $4.4
million.  The amount was determined based upon the difference between the agreed
upon estimated fair market value of the Company at the time of the redemption of
the former shareholder's  interest in 1990 and the amount previously paid to the
former shareholder.  Pursuant to Mr. Krasny's indemnification of the Company for
all  costs,  damages  or  settlements  related to the  litigation,  the  Company
recorded  the  payment  by Mr.  Krasny to the  former  shareholder  as a capital
contribution, with an offsetting reduction of paid-in capital for the additional
redemption  price paid to the former  shareholder.  Thus,  the settlement had no
impact on the Company's results of operations or cash flows.

     Mr.  Krasny  also  reimbursed  the  Company  for all  expenses,  net of tax
benefits  received by the Company,  related to this action.  For the years ended
December 31, 1998,  1997 and 1996,  the Company and Mr.  Krasny  incurred  legal
expenses in the aggregate of approximately $1.3 million,  $379,000 and $133,000,
respectively,  which have been assumed by Mr.  Krasny.  These legal expenses are
recorded as a selling and administrative  expense and the reimbursement,  net of
tax,  is  recorded  as an  increase  to  paid-in  capital.  As a  result  of the
settlement,  the Company does not anticipate  incurring any additional  expenses
related to this lawsuit.


ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     There were no matters submitted during the fourth quarter of 1998 to a vote
of security holders.






                                       9

<PAGE> 13


PART II

     ITEM 5.  MARKET FOR  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS.

     The  following  table  sets  forth  the high and low sales  prices  for the
Company's Common Stock on The Nasdaq Stock Market (R) for the periods indicated.
These quotations were obtained from Nasdaq. As of February 11, 1999, the Company
believes  there were  approximately  6,600  beneficial  owners of the  Company's
stock.  Except for distributions  prior to May 25, 1993, the date of termination
of the  Company's  election  to be taxed as an S  Corporation,  the  Company has
neither  declared nor paid any cash  dividends on its Common Stock.  The Company
currently  intends to retain  earnings for use in the operation and expansion of
its business and  therefore  does not  anticipate  paying cash  dividends in the
foreseeable future.



                                            1998                   1997
                                   ---------------------   --------------------
       QUARTER ENDED                  LOW        HIGH         LOW        HIGH
-----------------------------      ---------   ---------   ---------   ---------
March 31............                $47 1/2    $ 70 3/4    $42  7/8    $70
June 30.............                 38 1/4      61 1/2     39  5/8     57 3/4
September 30........                 36          55         53          78
December 31.........                 43 1/4     103 7/8     42 13/16    69 3/4

                                       10

<PAGE> 14

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)

<TABLE>
<CAPTION>


                                                                                  Year Ended December 31,
                                                        ----------------------------------------------------------------------------
                                                              1998           1997           1996           1995           1994
                                                        ----------------------------------------------------------------------------
<S>                                                     <C>              <C>            <C>            <C>            <C>
INCOME STATEMENT DATA :
Net sales                                               $     1,733,489  $    1,276,929  $     927,895  $     628,721  $     413,270
Cost of sales                                                 1,513,314       1,106,124        805,413        548,568        359,274
                                                        ----------------------------------------------------------------------------
Gross profit                                                    220,175         170,805        122,482         80,153         53,996
Selling and administrative expenses                             115,537          90,315         64,879         49,175         34,617
Exit charge (1)                                                       -               -          4,000              -              -
                                                        ----------------------------------------------------------------------------
Income from operations                                          104,638          80,490         53,603         30,978         19,379
Interest income (expense), net                                    4,708           4,259          3,469          1,973            392
Other income (expense), net                                        (335)           (241)          (188)            47            119
                                                        ----------------------------------------------------------------------------
Income before income taxes                                      109,011          84,508         56,884         32,998         19,890
Income tax provision                                             43,170          33,507         22,484         12,939          7,777
                                                        ----------------------------------------------------------------------------
Net income                                              $        65,841   $      51,001  $      34,400  $      20,059  $      12,113
                                                        ----------------------------------------------------------------------------

Net income per share 
Basic                                                   $          3.06  $        2.37  $        1.60  $        0.95  $        0.61
                                                        ----------------------------------------------------------------------------
Diluted                                                 $          3.03  $        2.35  $        1.58  $        0.95  $        0.61
                                                        ----------------------------------------------------------------------------
Weighted average number of common
shares outstanding 
Basic                                                            21,531          21,525         21,525         21,026         20,003
Diluted                                                          21,752          21,704         21,785         21,080         20,003

SELECTED OPERATING DATA :
Average order size                                       $          745 $           704  $         704  $         630  $         590
Number of orders shipped (in thousands)                           2,327           1,814          1,318            998            700
Customers serviced (in thousands)                                   634             575            462            374            274
Net sales per co-worker (in thousands)                   $        1,392 $         1,490  $       1,459  $       1,364  $       1,223
Inventory turnover                                                 24.0            21.4           23.4           21.7           22.2
Accounts receivable - days sales outstanding                       32.2            25.0           22.6           21.8           20.7

                                                                                       December 31,
                                                        ----------------------------------------------------------------------------
                                                              1998           1997           1996           1995           1994
                                                        ----------------------------------------------------------------------------
FINANCIAL POSITION:
Working capital                                          $      228,730 $       167,421  $     123,614  $      99,127  $      49,217
Total assets                                                    341,821         269,641        198,830        132,929         77,860
Total debt and capitalization lease obligations                       -               -              -              -              -
Total shareholders' equity                                      270,763         199,866        141,622        106,161         55,843


(1)  The exit charge provides for estimated  costs  associated with vacating the
     Company's   leased  facility.  See  Note  7 of  Notes  to  the Consolidated 
     Financial Statements.

</TABLE>

                                       11

<PAGE> 15

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     The following  discussion and analysis of the Company's financial condition
and  results of  operations  should be read in  conjunction  with the  Company's
Consolidated Financial Statements and the Notes thereto.

RESULTS OF OPERATIONS

     The  following  table  sets  forth for the  periods  indicated  information
derived from the Company's statements of income expressed as a percentage of net
sales:

--------------------------------------------------------------------------------
                                                 PERCENTAGE OF NET SALES
        FINANCIAL RESULTS                        YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------
                                           1998           1997            1996
                                          -------        -------         -------
Net sales                                 100.0 %        100.0 %         100.0 %
Cost of sales                              87.3           86.6            86.8
                                          -------        -------         -------
Gross profit                               12.7           13.4            13.2
Selling and administrative expenses         6.7            7.1             7.0
Exit charge                                ----           ----             0.4
                                          -------        -------         -------
Income from operations                      6.0            6.3             5.8
Interest and other income                   0.3            0.3             0.3
                                          -------        -------         -------
Income before income taxes                  6.3            6.6             6.1
Income tax provision                        2.5            2.6             2.4
                                          -------        -------         -------
Net income                                  3.8 %          4.0 %           3.7 %

OPERATING STATISTICS                               YEARS ENDED DECEMBER 31,
                                             -----------------------------------
                                                 1998         1997          1996
Number of orders shipped                    2,326,618    1,814,388     1,318,316
Average order size                               $745         $704          $704
Customers serviced                            634,000      575,000       462,000
Number of account managers, end of period         622          399           311
Annualized inventory turns                         24           21            23


                                       12

<PAGE> 16


     The following table represents sales by product line as a percentage of net
sales for each of the  periods  noted.  Product  lines are based  upon  internal
product code classifications and are not retroactively adjusted for the addition
of new categories or changes in individual product categorization.

                                       -----------------------------------------
                                                ANALYSIS OF PRODUCT MIX
                                                YEARS ENDED DECEMBER 31,
                                       -----------------------------------------
                                         1998             1997            1996
                                       --------         --------        --------
Notebook & Laptop Computers              19.8 %           25.0 %          26.3 %
Desktop Computers and Servers            15.7             13.2            11.9
Software                                 13.4             12.6            12.2
Printers                                 12.6             12.1            11.3
Data Storage Devices                     11.0             10.4             9.7
Net/Comm Products                         9.3              8.5             9.6
Video                                     7.8              7.8             7.6
Add-On Boards/Memory                      4.1              4.8             5.7
Input Devices                             2.6              3.0             2.8
Multi-Media                               1.9              2.0             1.8
Other Accessories                         1.8              0.6             1.1
                                        --------        ---------       --------
Total                                   100.0 %          100.0 %         100.0 %
                                        --------        ---------       --------



YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

     Net sales in 1998 increased  35.8% to a record $1.733  billion  compared to
$1.277 billion in 1997. The Company's  average order size increased 5.8% in 1998
to $745 from $704 in 1997.  The number of customers  serviced for the year ended
December  31,  1998 grew to  634,000  compared  to  575,000  for the year  ended
December 31, 1997. The growth in net sales is primarily attributable to a higher
concentration of commercial accounts, a higher level of sales per active account
and an increase in the number of orders processed. Sales to commercial accounts,
including business, government, educational and institutional,  increased to 87%
of net sales in 1998 from 82% in 1997. The number of active customers  increased
over 10% to  634,000 in 1998 from  575,000  in 1997,  while the number of active
commercial  accounts  increased  approximately  24% in the same period.  For the
twelve  months ended  December 31, 1998 the number of orders  shipped  increased
28.2% to over 2.3  million.  Desktop  computers  and  servers  were the  fastest
growing product category with unit volume  increasing 86% and dollar volume 62%.
Notebook  computers  continue to represent the largest  portion of the Company's
sales at 20%, with dollar volume increasing more than 7% from 1997.

     The average  selling price of desktop CPU's decreased 15.5% and the average
selling price of notebook CPU's  declined 3.5% from 1997.  The Company  believes
there may be additional  decreases in prices for personal  computers and related
products.  Such  decreases  require  the  Company to sell more units in order to
maintain  or  increase  the level of sales.  Should  future  manufacturer  price
reductions or the Company's marketing efforts fail to increase the level of unit
sales, the Company's sales growth rate and operating  results could be adversely
affected.  Sales of Compaq, Hewlett Packard, IBM, Microsoft and Toshiba products
comprise a substantial portion of the Company's sales. The loss of any of these,
or any other key vendors,  could have an adverse effect on the Company's results
from operations.  The statement concerning future prices, sales and results from
operations  are  forward  looking  statements  that  involve  certain  risks and
uncertainties such as stated above.

     The fastest  growing  product  categories in terms of sales dollars in 1998
were  desktop  computers  at 62%,  network  and  communication  products at 48%,
software at 45%,  data storage  devices at 44%, and printers at 41%.  Demand for
certain  products  offered by the  Company,  and the  growth of certain  product
categories,  are driven by advances in  technology  and the  development  of new
products and applications by the industry manufacturers, and acceptance of these
new  technologies  and  products  by  end-users.  Any  slowdown  in the  rate of
technological  advancement and new product development by industry manufacturers
could have a material adverse effect on the Company's future sales growth.

                                       13

<PAGE> 17

     Gross profit decreased as a percentage of net sales to 12.7% for the twelve
months ended December 31, 1998, compared to 13.4% in 1997. The decrease in gross
profit as a  percentage  of net sales is primarily  the result of lower  selling
margins  achieved on certain  product  lines,  lower levels of  inventory  price
protection from vendors and increased  shipping costs. The lower levels of price
protection  in 1998 were the result of changes by certain  manufacturers  in the
terms and conditions of their inventory price protection programs.

     On a  forward-looking  basis,  it is likely  that the gross  profit  margin
achieved  will be less than 13%,  and could be less than the 12.7%  achieved  in
1998.  The  statement  concerning  future  gross  profit  is a  forward  looking
statement that involves  certain risks and  uncertainties  such as the continued
participation  by vendors in inventory  price  protection  and rebate  programs,
product  mix,  market  conditions  and other  factors  which  could  result in a
fluctuation of gross margins below recent experience.  Certain manufacturers may
make additional  changes that limit the amount of price protection for which the
Company is eligible.  Such changes could have a negative  impact on gross margin
in future  periods.  Vendor rebate  programs are at the discretion of the vendor
and  many of these  programs  are  dependent  on  achieving  certain  goals  and
objectives.  Accordingly, there is no certainty that such programs will continue
at their current levels or that the  established  goals and  objectives  will be
attained.

     Selling and administrative expenses, which include net advertising expense,
other selling  administrative  expenses and the executive  incentive  bonus pool
decreased to 6.7% of net sales in 1998 versus 7.1% in 1997.

     Net advertising expense decreased as a percentage of net sales to 0.7% from
1.3%  for the  year  ended  December  31,  1998 and  1997,  respectively.  Gross
advertising  expense decreased to 3.0% of net sales in 1998 versus 3.5% in 1997.
The Company decreased catalog circulation and the number of national advertising
pages  versus the prior year,  while  expanding  its  spending  on branding  and
electronic commerce  activities.  The decline in gross advertising  spending was
consistent  with the  Company's  strategy  of shifting  resources  in 1998 to an
aggressive sales force  expansion.  Based upon the Company's  planned  marketing
initiatives,  future levels of gross advertising  expense as a percentage of net
sales  are  likely to be  relatively  consistent  with or higher  than the level
achieved in 1998. Cooperative advertising  reimbursements as a percentage of net
sales were consistent with the level achieved in 1997 at 2.3% of net sales.  The
cooperative  advertising  reimbursement  rate may  fluctuate in future  quarters
depending  on  the  level  of  vendor  participation   achieved  and  collection
experience. The statements concerning future advertising expense and cooperative
advertising  reimbursements  are forward looking statements that involve certain
risks and  uncertainties  including the ability to identify and  implement  cost
effective  incremental  advertising  and  marketing  programs  as  well  as  the
continued participation of vendors in the cooperative advertising  reimbursement
program.

     Other selling and  administrative  costs  increased to 5.7% of net sales in
1998 from 5.4% in the prior year due  primarily  to  increases  in  payroll  and
related  costs.  The increase in payroll  costs as a percentage  of sales is due
primarily to  investment  in the  recruiting,  training and  development  of new
account managers.  As of December 31, 1998 there were 622 account  managers,  an
increase of 56% from 399 account  managers as of December 31,  1997.  Of the 622
account managers,  approximately 73% had fewer than 24 months experience and 58%
had  fewer  than 12  months,  as  compared  to 70%  and 42% at the end of  1997,
respectively.

     The executive  incentive  bonus pool decreased to $3.3 million in 1998 from
$5.3 million in 1997.  Of the $2.0  million  decrease in the bonus pool from the
prior year,  $800,000 results from an effective increase in the pool in 1997 due
to the $4.0 million exit charge taken in 1996,  $100,000 is due to a lower level
of growth in operating  income and the remaining $1.1 million is due to a change
in the bonus pool rate. For 1998, the  Compensation  and Stock Option  Committee
established  the bonus pool at 15% of the increase in operating  income over the
prior  year,  versus 20% in prior  periods.  For 1999,  the bonus pool rate will
remain at 15% of the increase in operating income over 1998.

                                       14

<PAGE> 18

     Legal costs incurred by the majority shareholder, Chairman and CEO, Michael
P. Krasny,  in connection  with the lawsuit filed by a former  shareholder  were
$1.3 million and $379,000, in 1998 and 1997, respectively. Mr. Krasny reimbursed
the Company for these costs, which were recorded by the Company as expenses with
an  offsetting  increase to paid-in  capital,  net of tax effects.  Although the
Company and Mr. Krasny believe their actions were honest and proper, they agreed
to a settlement of the suit in December 1998, whereby all pending litigation was
dismissed.  Under terms of the  settlement  the Company and Mr. Krasny agreed to
make a one time payment to the former shareholder of approximately $4.4 million,
which  amount was paid by Mr.  Krasny.  The Company  recorded the payment by Mr.
Krasny to the former shareholder as a capital  contribution,  with an offsetting
reduction of paid-in  capital for the  additional  redemption  price paid to the
former shareholder.  Thus, the settlement had no impact on the Company's results
of operations or cash flows.

     Interest income,  net of other expenses,  increased to $4.4 million in 1998
compared to $4.0 million in 1997,  primarily  due to higher  levels of available
cash.

     The effective  income tax rate,  expressed as a percentage of income before
income  taxes,  was 39.6% for the year ended  December  31, 1998 versus 39.7% in
1997.

     Net income for the twelve months ended December 31, 1998 was $65.8 million,
a 29% increase over $51.0 million for the twelve months ended December 31, 1997.
Diluted  earnings per share was $3.03 and $2.35 for the year ended  December 31,
1998 and 1997, respectively, an increase of 29%.


YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

     Net sales in 1997 increased  37.6% to a record $1.277  billion  compared to
$928 million in 1996. The Company's average order size in 1997 of $704 per order
was unchanged from 1996 and orders shipped  increased 37.6% to over 1.8 million.
The number of customers  serviced  for the year ended  December 31, 1997 grew to
575,000 compared to 462,000 for the year ended December 31, 1996.

     The growth in net sales is primarily  attributable  to growth in the number
of orders and customers  resulting from the expansion of marketing efforts,  new
product offerings,  manufacturer price reductions, and an increase in the number
of account  managers.  Lower  manufacturer  pricing levels and expanded  product
features in notebooks resulted in a shift within the notebook and laptop product
category to lower priced  models.  Selling prices on many models of notebook and
desktop  computers   decreased   substantially  from  previous  periods  due  to
manufacturer price reductions.  As a result,  desktop and notebook computer unit
volume grew 69% and 65%, respectively,  from 1996 while dollar sales volume grew
52% and 31%,  respectively.  The downward trend in  manufacturer  prices for CPU
products  stimulated  additional unit sales and further  expanded the market for
personal computers.

     The fastest  growing product  categories in 1997 were desktop  computers at
52%, data storage devices at 48%,  printers at 47%, software at 42% and notebook
computers at 31%. Video and memory products declined as a percentage of sales as
unit prices for these  products  declined  from the previous  year.  The Company
believes  that new product  introductions  in 1997,  including  MMX  technology,
positively impacted sales of CPU's, multimedia products, input devices, software
and data storage devices.

     The Company  expanded its number of account  managers to 399 as of December
31, 1997 from 311 at December 31, 1996.

     Gross profit  increased as a percentage  of net sales to 13.4% for the year
ended December 31, 1997, compared to 13.2% for the year ended December 31, 1996.
The increase in gross profit as a  percentage  of net sales is primarily  due to
the expansion of selling margin on certain  product lines  resulting from vendor
support programs, opportunistic purchases and pricing strategies.

                                       15

<PAGE> 19

     Selling and administrative expenses increased slightly to 7.1% of net sales
for the year ended  December 31, 1997 from 7.0% for the year ended  December 31,
1996.

     Net  advertising  expense as a percentage of net sales increased to 1.3% of
net sales in 1997 compared to 1.0% in 1996. Gross advertising  expense increased
to 3.5% of net sales in 1997  versus 3.2% in the prior  year,  primarily  due to
expanded catalog  circulation and national  advertising  pages combined with new
marketing  initiatives.   Cooperative  advertising   reimbursements   aggregated
approximately 2.2% of net sales in 1997 and 1996.

     The  executive  incentive  bonus pool was $5.3 million and $5.0 million for
the years ended December 31, 1997 and 1996, respectively, and is included within
selling and administrative  expenses.  Pursuant to existing plans, the amount of
the executive  incentive bonus pool is set by the Compensation  Committee of the
Board of Directors with a maximum  eligible  amount of 20% of the year over year
increase in income from operations.  The exit charge recorded in 1996 caused the
executive  incentive  bonus pool to decrease in 1996 by $800,000 and increase by
the same amount in 1997.

     Legal  costs  incurred  by the  majority  shareholder  for the  year  ended
December 31, 1997 and 1996,  in  connection  with the lawsuit  filed by a former
shareholder were $379,000 and $133,000, respectively.

     Other  selling  and  administrative  costs  were  5.4% of net sales in 1997
compared to 5.5% in the prior year, as increased occupancy and moving costs were
offset by improved productivity and other cost control measures.

     Interest income,  net of other expenses,  totaled $4.0 million for the year
ended December 31, 1997 compared to $3.3 million for the year ended December 31,
1996.  The increase is due to higher  interest rates combined with higher levels
of cash available for investment  resulting from cash generated from operations,
including the tax benefit from stock option and restricted stock transactions in
the first  quarter of 1997,  offset by funds  utilized for  construction  of the
Vernon Hills facility.

     The effective  income tax rate,  expressed as a percentage of income before
income taxes,  increased  slightly to 39.7% for the year ended December 31, 1997
from 39.5% for the year ended December 31, 1996.

     Net income for the year ended December 31, 1997 was $51.0 million,  a 48.3%
increase  over $34.4  million  for the year ended  December  31,  1996.  Diluted
earnings per share was $2.35 and $1.58 for the year ended  December 31, 1997 and
1996,  respectively,  an  increase  of 48.7%.  Excluding  the impact of the exit
charge and its related impact on the executive  incentive bonus pool in 1997 and
1996, pro forma net income and diluted earnings per share were $51.5 million and
$2.37 in 1997,  representing  increases of 41.6% and 41.9%,  respectively,  from
1996.  All per share and  related  amounts  have been  adjusted  to reflect  the
three-for-two  stock split effected in the form of a stock dividend paid on July
15, 1996.

SEASONALITY

     Although the Company has historically  experienced variability in the rates
of  sales  growth,  it  has  not  historically  experienced  seasonality  in its
business.

LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL

     CDW has  historically  financed  its  operations  and capital  expenditures
primarily  through cash flow from  operations,  short-term  bank  borrowings and
public  offerings of common stock.  At December 31, 1998,  the Company had cash,
cash equivalents and marketable  securities of $70.7 million and working capital
of $228.7  million.  At December  31,  1997 the  Company had working  capital of
$167.4 million. The increase of $61.3 million in working capital in 1998 was due


                                    16

<PAGE> 20

primarily to certain  components of the Company's cash flow from  operations for
the year ended  December  31, 1998 offset by capital  expenditures  for facility
expansion and other purposes.  The Company's current primary and anticipated use
of cash,  cash  equivalents  and marketable  securities  balances is to fund the
growth in working capital and capital  expenditures  necessary to support future
growth in sales.
 
MARKET RISK

     The Company's  investments in marketable securities as of December 31, 1998
and 1997 are all due in one year or less and are concentrated in U.S. Government
and Government Agency  securities.  As such, the risk of significant  changes in
the value of these  securities as a result of a change in market  interest rates
is minimal.

CASH FLOWS

     Cash provided by operating  activities in 1998 was $4.5 million compared to
$19.5  million  for  1997.  The  primary   working  capital  factors  that  have
historically affected the Company's cash flows from operations are the levels of
accounts  receivable,  merchandise  inventory  and  accounts  payable.  Accounts
receivable at December 31, 1998 increased  $66.0 million from December 31, 1997.
The increase in accounts  receivable  resulted from increased  sales volume,  an
increase in the  percentage of net sales  generated  from open credit terms with
commercial customers to 62% from 55% in 1997.

     Cash used in investing  activities  for 1998 was $17.6 million  compared to
$17.8 million in 1997. In 1998, the Company incurred approximately $15.1 million
of capital  expenditures for the purchase of additional  land,  expansion of the
Vernon Hills warehouse, warehouse equipment,  information technology investments
and leasehold  improvements.  The remainder of cash used in investing activities
reflects increases in the Company's marketable securities portfolio.

     Financing  activities  in  1998  included  the  renewal  of  the  Company's
unsecured credit  facilities with two financial  institutions  aggregating $50.0
million. The credit facilities expire in June 1999 and contain certain financial
covenants.  Borrowings  under one of the lines bear  interest  at the prime rate
less 2.5%, LIBOR plus 0.5% or the federal funds rate plus 0.5%, as determined by
the Company.  Borrowings  under the second credit  facility bear interest at the
prime rate less 2.5%,  LIBOR plus 0.45% or the federal funds rate plus 0.45%, as
determined by the Company. At December 31, 1998 there were no borrowings against
either of the  credit  facilities.  The  Company  intends  to renew  the  credit
facilities  upon  expiration.  In  October  1998,  the  Company  established  an
unsecured  stand-by  letter of credit  for  approximately  $160,000  related  to
improvements to the Vernon Hills facility which expires in June 1999.

     During  the  third  quarter  of 1998,  the  Company's  Board  of  Directors
authorized  the repurchase of up to 1 million shares of its common stock in open
market transactions. The Company repurchased a total of 50,000 shares during the
third quarter for  approximately  $2.1 million.  The Company intends to hold the
repurchased  shares  in  treasury  for  general  corporate  purposes,  including
issuances under various employee stock option plans.

YEAR 2000 READINESS DISCLOSURE

General
     The Year 2000  Issue  ("Y2K")  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,  receive or
ship products, send invoices, or engage in similar normal business activities.

                                       17

<PAGE> 21

     The Company has  initiated  a Y2K project and  assigned a Y2K project  team
designed to make all its hardware and software  systems Y2K  compliant  prior to
December 31, 1999. The Company  intends to contract an outside  organization  to
review its project methodology and status to ensure all aspects of the Y2K issue
have been addressed.

Project
     CDW's Y2K  project  consists  of  internal  and  external  components.  The
internal section has been divided into five steps:
     1.   Awareness - Awareness  includes  evaluating  industry best  practices,
          generating    management   and   employee   awareness,    establishing
          communications methods and establishing the project team.
     2.   Assessment - This phase  includes  hardware  and  software  compliance
          assessment,  establishment  of the  size  and  scope  of the  project,
          establishment  of  a  project  timeline,  priorities,   budgeting  and
          allocation of resources.
     3.   Renovation  -   Renovation   consists  of   establishing   a  detailed
          implementation plan, the design of new systems and system corrections,
          writing of system code and software and hardware testing.
     4.   Validation  -  Validation  includes  testing  new  systems  and system
          corrections to ensure they will function properly in operation.
     5.   Implementation - Final certification of the new and corrected systems,
          implementation  of the systems and  monitoring to ensure they continue
          to function.

     The  Awareness,  Assessment  and  Renovation  phases  of the  project  were
completed  prior to December  1998.  As a result of the  Assessment  phase,  the
Company  believes  it  will  not be  required  to  replace  any of its  hardware
components  or  significant  portions  of its  software  to make its systems Y2K
compliant.  As of  December  31,  1998 the  Company  believes  it has  completed
substantially  all of the  validation  and  implementation  of internal  systems
critical to  continuing  operations.  The  remaining  portions  of the  internal
project include validation and implementation of secondary files and systems, as
well as the  review of project  methodology  and  status to be  conducted  by an
outside organization.

     The external  portion of the project focuses on assessing the Y2K readiness
of  product  and  service  vendors  and its  potential  impact on the  Company's
operations.  The Company will begin communications with its vendors in the first
quarter of 1999 to assess the status of the vendors' Y2K  projects.  The Company
will then work through issues with its business  partners to minimize  potential
business interruptions.  This portion of the project is expected to be completed
prior to December 31, 1999.

Costs
     The  Company  estimates  that  total  costs  for the Y2K  project,  through
December 31, 1999,  will range between  $750,000 and $1 million.  As of December
31,  1998  the  Company  has  incurred,  and  recorded  as  operating  expenses,
approximately  $240,000 in costs related to the project,  of which approximately
$190,000 were incurred during the year ended December 31, 1998.  Essentially all
of the Company's  expenditures to date are for internal payroll costs related to
the assessment and correction of internal  systems.  Of the estimated  remaining
costs of $510,000 to  $760,000,  approximately  one-third  relate to the cost of
assessing and communicating with vendors and two-thirds relate to the correction
and testing of internal systems.

Risks
     The  failure  to  correct  a  material  Y2K  problem  could  result  in  an
interruption  in,  or a  failure  of,  certain  normal  business  activities  or
operations.  Such failures could  materially and adversely  affect the Company's
results of operations and financial  condition.  Due to the general  uncertainty
inherent in the Y2K problem,  resulting in part from the  uncertainty of the Y2K
readiness of third-party  suppliers,  the Company is unable to determine at this
time whether the consequences of Y2K failures will have a material impact on the
Company's  results of  operations  and  financial  condition.  The Company's Y2K
project is expected to  significantly  reduce the Company's level of uncertainty
about the Y2K problem and, in particular, about the Y2K compliance and readiness
of its material  vendors.  The Company believes that, with the completion of the
project as scheduled,  the  possibility of significant  interruptions  of normal
operations  should be  minimized.  Although the Company  believes the  potential
impact is not material,  as a result of the Y2K issue the Company may be exposed
to lawsuits resulting from the sale of products which are not Y2K compliant.

                                       18

<PAGE> 22

     The  statements  concerning  future  impact of the Y2K  issue  are  forward
looking  statements  that involve certain risks and  uncertainties,  such as the
inability to receive  products on a timely basis from vendors,  ship products to
customers and other factors, which could have a material impact on the Company's
results from  operations.  Certain vendors may fail to adequately  prepare their
information  systems or the  Company's  own Y2K  project may not correct all Y2K
issues.  Accordingly,  there is no  certainty  that  either  the  Company or its
vendors will complete their Y2K projects prior to December 31, 1999.


     Certain  statements  included in  Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations  concerning  the Company's  sales
growth, gross profit as a percentage of sales, advertising expense,  cooperative
advertising  reimbursements,  exit charge and Y2K readiness are  forward-looking
statements that involve certain risks and uncertainties, as specified herein.

     ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The information required by this item is contained in a separate section of
this  Report  beginning  on page  F(i).  See  Index  to  Consolidated  Financial
Statements beginning on page F(i).

     ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     There were no  disagreements  with  accountants on accounting and financial
disclosure matters during the periods reported herein.

     PART III

     ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required hereunder is incorporated by reference herein from
the  Registrant's  1998  Definitive  Proxy  Statement,  to be filed  pursuant to
Regulation 14A not later than April 30, 1999.

     ITEM 11. EXECUTIVE COMPENSATION.

     The information required hereunder is incorporated by reference herein from
the  Registrant's  1998  Definitive  Proxy  Statement,  to be filed  pursuant to
Regulation 14A not later than April 30, 1999.

     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required hereunder is incorporated by reference herein from
the  Registrant's  1998  Definitive  Proxy  Statement,  to be filed  pursuant to
Regulation 14A not later than April 30, 1999.

     ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required hereunder is incorporated by reference herein from
the  Registrant's  1998  Definitive  Proxy  Statement,  to be filed  pursuant to
Regulation 14A not later than April 30, 1999.

                                       19

<PAGE> 23

                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.

(a)           The following documents are filed as part of this report :

              1.    Financial Statements  (See  Index to Consolidated  Financial
                    Statements on page F(i) of this Report);

              2.    Index to Financial Statement Schedule :                 Page
                                                                            ----
                    Report of Independent Accountants on Financial
                    Statement Schedule                                       S-1

                    Schedule II - Valuation and Qualifying Accounts          S-2

              All other schedules are omitted since the required  information is
              not  present or is not  present in amounts  sufficient  to require
              submission of the schedule, or because the information required is
              included  in  the  consolidated   financial  statements  or  notes
              thereto.

              3.   Exhibits  required  by  Securities  and  Exchange  Commission
                   Regulation S-K, Item 601:

<TABLE>
<CAPTION>

              EXHIBIT NO.               DESCRIPTION OF DOCUMENT
              ----------                -----------------------
              <S>              <C>
              3 (c)            Articles of Incorporation of CDW Computer Centers, Inc. (an Illinois
                               Corporation) (iii)
              3 (d)            Bylaws of CDW Computer Centers, Inc. (an Illinois Corporation) (iii)
              10 (a)           CDW Computer Centers, Inc. Employees' Defined Contribution
                               Retirement Plan and Trust (i)
              10 (b)           CDW Incentive Stock Option Plan (i)
              10 (c)           MPK Stock Option Plan and Agreement (i)
              10 (d)           MPK Restricted Stock Plan and Agreement (i)
              10 (e)           Employment and Non-Competition Agreement dated as of March 15, 1993
                               between the Company and Michael P. Krasny (i)
              10 (f)           Employment and Non-Competition Agreement dated as of March 15, 1993
                               between the Company and Greg  C. Zeman (i)
              10 (g)           Employment and Non-Competition Agreement dated as of March 15, 1993
                               between the Company and Daniel B. Kass (i)
              10 (h)           Employment and Non-Competition Agreement dated as of March 15, 1993
                               between the Company and Mary C. Gerlits (i)
              10 (n)           Tax Indemnification Agreement dated as of May 25, 1993 between the
                               Company and Michael P. Krasny (i)
              10 (p)           Lease Agreement dated February 22, 1993 between the Company, as
                               lessee, and Chevy Chase Business Park Limited Partnership, as lessor,
                               relating to the premises located in Buffalo Grove, Illinois (i)
              10 (s)           Indemnification Agreement between the Company and Michael P. Krasny
                               to be dated as of May 19, 1993 (i)
              10 (t)           CDW Director Stock Option Plan (i)
              10 (w)           Indemnification and Hold Harmless Agreement between Michael P.
                               Krasny and the Company dated May 14, 1993 (i)
              10 (y)           First Lease Amendment dated as of May 13, 1993 to Lease Agreement
                               dated February 22, 1993 between the Company, as lessee, and Chevy  
                               Chase Business Park Limited Partnership, as lessor, relating to the
                               premises located in Buffalo Grove, Illinois (i)

                                       20

<PAGE> 24

              10 (ee)          Lease Agreement dated January 25, 1995 between the Company, as
                               lessee, and IJM Management Limited Partnership, as agent for the owner,
                               as lessor, relating to the premises located in Chicago, Illinois (ii)
              10 (ff)          Purchase/Sale  Agreement  dated and effective  February 12, 1997 between 
                               the Company, as buyer, and Continental Executive Parke, L.L.C. as seller,
                               relating to the premises located in Vernon Hills, Illinois, made on March 
                               14, 1997 (iii)
              10 (ii)          Non-statutory Stock Option Agreement dated September 5, 1996 between
                               the Company and Harry J. Harczak, Jr. (iv)
              10 (jj)          Non-statutory Stock Option Agreement dated September 5, 1996 between
                               the Company and James R. Shanks (iv)
              10 (kk)          Form of Indemnification and Hold Harmless Agreement between the
                               Company and the Selling Shareholder (v)
              10 (ll)          CDW 1996 Incentive Stock Option Plan (v)
              10 (oo)          Purchase/Sale  Agreement  dated and effective  December 16, 1997 between 
                               the Company, as buyer, and Continental Executive Parke, Vernon Hills,
                               Illinois, made on March 2, 1997 (vi)
              10 (pp)          CDW 1997 Officer and Manager Bonus Plan (vi)
              10 (qq)          Revolving Note between the Company and LaSalle National Bank dated June 28,
                               1998 (vii)
              10 (rr)          Revolving  Note between the Company and The Northern Trust Company dated 
                               June 30, 1998 (vii)
              10 (ss)          First Amendment to CDW Incentive Stock Option Plan
              10 (tt)          First Amendment to CDW 1996 Incentive Stock Option Plan

              21      Subsidiaries of the Registrant (i)
              23      Consent of Independent Accountants
              27      Financial Data Schedule

     FOOTNOTES

                      (i)      Incorporated by reference from the exhibits filed
                               with   the   Company's   registration   statement 
                               (33-59802) on Form S-1 filed under the Securities
                               Act  of  1933  filed  on May  11,  1993  and  the  
                               Company's  registration  statement (333-60025) on 
                               Form S-3 filed under the Securities  Act of  1933 
                               on July 28, 1998.
                      (ii)     Incorporated by reference from the exhibits filed
                               with the Company's  quarterly report (0-21796) on
                               Form 10-Q for the quarter ended June 30, 1995.
                      (iii)    Incorporated by reference from the exhibits filed
                               with   the   Company's   registration   statement
                               (33-94820) on Form S-3 filed under the Securities
                               Act of 1993.
                      (iv)     Incorporated by reference from the exhibits filed
                               with the Company's  quarterly report (0-21796) on
                               Form 10-Q for the  quarter  ended  September  30,
                               1997.
                      (v)      Incorporated by reference from the exhibits filed
                               with   the   Company's   registration   statement
                               (333-20935)   on  Form  S-3   filed   under   the
                               Securities Act of 1993.
                      (vi)     Incorporated by reference from the exhibits filed
                               with the  Company's  annual  report  (0-21796) on
                               Form 10-K for the year ended December 31, 1997.
                      (vii)    Incorporated by reference from the exhibits filed
                               with the Company's  Quarterly report (0-21796) on
                               Form 10-Q for the quarter ended June 30, 1998.

                                       21

<PAGE> 25

     (b)              The  Company  did not file any  reports on Form 8-K during
                      the last quarter of the year ended December 31, 1998.

     (c)              The Exhibits required by Item 601 of Regulation S-K are reflected above in Section           
                      (a) 3. of this Item.

     (d)              The financial statement schedule is included as reflected in Section (a) 2. of this
                      Item.

</TABLE>

                                       22

<PAGE> 26

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                           CDW COMPUTER CENTERS, INC.

Date : March 29, 1999

                                        By :     /s/ Michael P. Krasny          
                                                 Michael P. Krasny, Chairman of
                                                 the Board, Chief Executive
                                                 Officer and Secretary


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>


     Signature                          Title                              Date

     <S>                                <C>                                <C>
     /s/ Michael P. Krasny              Chairman of the Board, Chief       March 29, 1999
     Michael P. Krasny                  Executive Officer and Secretary

     /s/ Gregory C. Zeman               President and Director             March 29, 1999
     Gregory C. Zeman

     /s/ Daniel B. Kass                 Vice President-Sales               March 29, 1999
     Daniel B. Kass                     and Director

     /s/ Harry J. Harczak, Jr.          Chief Financial Officer            March 29, 1999
     Harry  J. Harczak, Jr.             and Treasurer

     /s/ Sandra M. Rouhselang           Controller and                     March 29, 1999
     Sandra M. Rouhselang               Chief Accounting Officer

</TABLE>

                                       23

<PAGE> 27


                                ITEMS 8 AND 14(A)
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





                                                                         Page(s)


Report of Independent Accountants                                            F-1

Consolidated Balance Sheets as of                                            F-2
         December 31, 1998 and 1997

Consolidated Statements of Income for the years ended                        F-3
         December 31, 1998, 1997    and 1996

Consolidated Statement of Shareholders' Equity for the years ended           F-4
         December 31, 1998, 1997    and 1996

Consolidated Statements of Cash Flows for the years ended                    F-5
         December 31, 1998, 1997    and 1996

Notes to Consolidated Financial Statements                                   F-6

















                                      F(i)

<PAGE> 28



REPORT OF INDEPENDENT ACCOUNTANTS


The Board of Directors
CDW Computer Centers, Inc.
Vernon Hills, Illinois

In our  opinion the  accompanying  consolidated  balance  sheets and the related
consolidated  statements of income,  shareholders' equity and cash flows present
fairly,  in all  material  respects,  the  financial  position  of CDW  Computer
Centers, Inc. and Subsidiaries (the "Company") as of December 31, 1998 and 1997,
and the results of their  operations  and their cash flows for each of the three
years in the period ended  December  31,  1998,  in  conformity  with  generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance  about whether the  statements are free of material  misstatement.  An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.


PricewaterhouseCoopers LLP

Chicago, Illinois
January  21, 1999



                                      F-1

<PAGE> 29

                   CDW COMPUTER CENTERS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 (in thousands)


<TABLE>
<CAPTION>

                                                                          December 31,
                                                                          ------------
                                                                  1998                    1997
                                                              -------------           ------------
ASSETS
<S>                                                             <C>                    <C>
Current assets :                                                                        
      Cash and cash equivalents                                 $  4,230               $  18,233
      Marketable securities                                       66,458                  61,192    
      Accounts receivable, net of allowance for doubtful
        accounts of $3,185 and $1,950, respectively              152,308                  87,524 
      Miscellaneous receivables                                    5,896                   3,960                
      Merchandise inventory                                       64,392                  61,941               
      Prepaid expenses and other assets                            1,423                     759                  
      Deferred income taxes                                        5,081                   3,587              
                                                                ---------              ---------

         Total current assets                                    299,788                 237,196               

Property and equipment, net                                       37,056                  26,704                
Deferred income taxes and other assets                             4,977                   5,741               
                                                                ---------              ---------

         TOTAL ASSETS                                            341,821               $ 269,641              
                                                                =========              =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities :
      Accounts payable                                          $ 41,358               $  44,451              
      Accrued expenses :
         Payroll, Commissions and management
          incentive Compensation                                  16,279                  12,996               
         Income taxes                                              5,146                   5,504                 
         Exit costs                                                2,715                   3,391                
         Other                                                     5,560                   3,433                 
                                                                ---------              ---------

         Total current liabilities                                71,058                  69,775             
                                                                ---------              ---------

Commitments and contingencies

Shareholders' equity :

      Preferred shares, $1.00 par value; 5,000 shares
         authorized; none issued                                        -                      -
      Common shares, $ .01 par value; 75,000 shares
         authorized; 21,571 and 21,525 shares 
         issued, respectively                                         216                    215                
      Paid-in capital                                              81,352                 74,680                 
      Retained earnings                                           192,259                126,418                 
      Unearned compensation                                          (975)                (1,447)            
                                                                ---------              ---------
                                                                  272,852                199,866
         
      Less cost of common shares in treasury, 50 and
         0 shares, respectively                                    (2,089)                     -

         Total shareholders' equity                               270,763                199,866               
                                                                ---------              ---------
         

          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              341,821              $ 269,641              
                                                                =========              =========
</TABLE>

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

                                      F-2

<PAGE> 30


                   CDW COMPUTER CENTERS, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                      (in thousands, except per share data)

<TABLE>
<CAPTION>


                                                            Years Ended December 31,                      
                                                  ---------------------------------------------     
                                                     1998             1997             1996       
                                                  ---------------------------------------------     


<S>                                               <C>              <C>              <C>             
 Net sales                                        $ 1,733,489      $ 1,276,929      $   927,895      
 Cost of sales                                      1,513,314        1,106,124          805,413      
                                                  -----------      -----------      ----------- 

 Gross profit                                         220,175          170,805          122,482     

 Selling and administrative expenses                  115,537           90,315           64,879       
 Exit charge                                                -                -            4,000       
                                                  -----------      -----------      -----------

 Income from operations                               104,638           80,490           53,603         

 Interest income                                        4,708            4,259            3,469        
 Other expense                                           (335)            (241)            (188)     
                                                  -----------      -----------      -----------

 Income before income taxes                           109,011           84,508           56,884        

 Income tax provision                                  43,170           33,507           22,484         
                                                  -----------      -----------      -----------

 Net income                                       $    65,841      $    51,001      $    34,400        
                                                  ===========      ===========      ===========

 Earnings per share
    Basic                                         $      3.06      $      2.37      $      1.60      
                                                  ===========      ===========      ===========
    Diluted                                       $      3.03      $      2.35      $      1.58      
                                                  ===========      ===========      ===========

 Weighted average number of
 common shares outstanding
    Basic                                              21,531           21,525           21,525          
                                                  ===========      ===========      ===========
    Diluted                                            21,752           21,704           21,785          
                                                  ===========      ===========      =========== 
</TABLE>

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

                                       F-3

<PAGE> 31

                   CDW COMPUTER CENTERS, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                                                           Total
                                              Common Stock     Paid in    Retained      Unearned    Treasury Shares    Shareholders'
                                             Shares  Amount    Capital    Earnings    Compensation  Shares   Amount        Equity
                                             --------------------------------------------------------------------------------------
<S>                                          <C>     <C>      <C>         <C>         <C>           <C>     <C>         <C>
BALANCE AT DECEMBER 31, 1995                 21,525  $  215   $  66,414   $  41,017    $  (1,485)         - $     -     $  106,161

MPK Restricted Stock Plan forfeitures                              (127)                     127                                 -

Amortization of unearned compensation                                                        981                               981  

Compensation stock option grants                                  1,586                   (1,586)                                - 

Capital contribution for legal costs assumed      
     by majority shareholder, net of tax                             80                                                         80

Net income                                                                   34,400                                         34,400
                                             --------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1996                 21,525     215      67,953      75,417       (1,963)        -        -        141,622 

MPK Restricted Stock Plan forfeitures                               (35)                      35                                 -

Amortization of unearned compensation                                                        481                               481

Compensatory stock option grants, net of
     forfeitures                                                    699                                                        699  

Tax Benefit from restricted stock and
     stock option transactions                                    5,835                                                      5,835
 
Capital contribution for legal costs assumed
     by majority shareholder, net of tax                            228                                                        228

Net income                                                                   51,001                                         51,001
                                             --------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1997                 21,525     215      74,680     126,418       (1,447)        -        -        199,866  

MPK Restricted Stock Plan forfeitures                                (1)                                                        (1)

Amortization of unearned compensation                                                        472                               472

Compensatory stock option grants                                    986                                                        986  

Exercise of Stock Options                        46       1       1,140                                                      1,141

Tax benefit from stock option transactions                        3,741                                                      3,741

Capital contribution for litigation
     settlement by majority shareholder                           4,365                                                      4,365

Additional redemption price pursuant to
     litigation settlement                                       (4,365)                                                    (4,365)

Capital contibution for legal costs assumed
     by majority shareholder, net of tax                            806                                                        806

Purchase of treasury shares                                                                             50   (2,089)        (2,089)

Net income                                                                   65,841                                         65,841
                                             --------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1998                 21,571  $  216   $  81,352   $ 192,259    $    (975)       50  $(2,089)    $  270,763  
                                             ======================================================================================

</TABLE>


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

                                      F-4


<PAGE> 32

                   CDW COMPUTER CENTERS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                      Years Ended December 31,
                                                                               --------------------------------------
                                                                                 1998           1997           1996
                                                                               --------       --------       --------
<S>                                                                            <C>            <C>            <C>
Cash flows from operating activities:

Net income                                                                     $ 65,841       $ 51,001       $ 34,400      

Adjustments   to  reconcile  net  income  to  net  cash  provided  by
operating activities:

        Depreciation                                                              4,758          2,672          1,975         
        Accretion of marketable securities                                       (2,797)        (2,014)           (87)         
        Stock-based compensation expense                                          1,458          1,180            981  
        Allowance for Doubtful Accounts                                           1,235            850            475            
        Legal fees assumed by majority shareholder                                  806            228             80          
        Deferred tax benefit                                                       (720)        (1,351)        (3,228)   
        Loss on disposal of fixed asset                                               -              -            281    
        Tax benefit from stock option exercise                                     3,741         5,835              -       

        Changes in assets and liabilities:
            Accounts receivable                                                 (66,019)       (30,978)       (20,310)       
            Miscellaneous receivables                                            (1,936)           (29)        (1,569)       
            Merchandise inventory                                                (2,451)       (20,479)       (14,040)      
            Prepaid expenses and other assets                                      (675)            58           (625)       
            Accounts payable                                                     (3,093)         7,809         17,206       
            Accrued compensation                                                  3,283          2,246          6,061         
            Accrued income taxes and other expenses                               1,769          3,108          3,187        
            Accrued exit costs                                                     (676)          (596)         3,987           
                                                                               --------       --------       --------

        Net cash provided by operating activities                                 4,524         19,540         28,774     
                                                                               --------       --------       --------

Cash flows from investing activities:

        Purchases of available-for-sale securities                              (26,810)       (13,825)       (24,701)       
        Redemptions of available-for-sale securities                             32,250          9,575         27,300         
        Purchases of held-to-maturity securities                                (88,122)       (87,330)       (86,781)      
        Redemptions of held-to-maturity securities                               80,213         90,892         68,732       
        Purchase of property and equipment                                      (15,110)       (17,081)       (11,078)        
                                                                               --------       --------       --------

        Net cash used in investing activities                                   (17,579)       (17,769)       (26,528)   
                                                                               --------       --------       --------

Cash flows from financing activities:

        Proceeds of treasury shares                                              (2,089)             -              -       
        Proceeds from exercise of stock options                                   1,141              -              -           
                                                                               --------       --------       --------

        Net cash used in investing activities                                      (948)             -              -        
                                                                               --------       --------       --------

Net (decrease) increase in cash                                                 (14,003)         1,771          2,246     

Cash and cash equivalents - beginning of period                                  18,233         16,462         14,216        
                                                                               --------       --------       --------

Cash and cash equivalents - end of period                                      $  4,230       $ 18,233       $ 16,642       
                                                                               ========       ========       ========

Supplementary disclosure of cash flow information:
        Interest paid                                                          $      -       $      1       $     14      
        Taxes paid                                                             $ 40,400       $ 26,197       $ 23,763       

</TABLE>


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

                                      F-5

<PAGE> 33

CDW COMPUTER CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.        Description of Business

          CDW Computer  Centers,  Inc. and its  subsidiaries  (collectively  the
          "Company")  are  engaged in the  distribution  of brand name  personal
          computers and related products  primarily  through direct marketing to
          end users within the United States.  The Company's primary business is
          conducted from a combined telemarketing,  corporate office,  warehouse
          and showroom facility located in Vernon Hills,  Illinois.  The Company
          also operates a telemarketing  facility in Buffalo Grove,  Illinois, a
          retail showroom in Chicago,  Illinois and a government sales office in
          Chantilly, Virginia.

          The Company extends credit to business,  government and  institutional
          customers  under  certain   circumstances  based  upon  the  financial
          strength of the customer.  Such customers are typically granted net 30
          day  credit  terms.  The  balance  of the  Company's  sales  are  made
          primarily through third party credit cards and for cash-on-delivery.

          Upon  assessment of Statements of Financial  Accounting  standards No.
          131 (SFAS 131),  "Disclosures  about  Segments of and  Enterprise  and
          Related Information",  the Company has determined that through 1998 it
          operated as one business segment as defined by SFAS 131.

2.        Summary of Significant Accounting Policies

          Principles of Consolidation

          The  accompanying   consolidated   financial  statements  include  the
          accounts  of  CDW  Computer   Centers,   Inc,  and  its  wholly  owned
          subsidiaries,  CDW Government,  Inc. (CDW-G),  which was formed on May
          27, 1998, and Northbrook Ad Agency,  Inc. (NAA).  CDW-G sells personal
          computers  and related  products  and focuses  exclusively  on serving
          government  and  educational   accounts.   NAA  provides   advertising
          services,  primarily  consisting  of media  placements,  solely to the
          Company. All intercompany  transactions and accounts are eliminated in
          consolidation.

          Basis of Presentation

          The Company has adopted  Statement of Financial  Accounting  Standards
          No. 130 (SFAS 130),  "Reporting  Comprehensive  Income". For the years
          ended  December 31, 1998,  1997 and 1996 the Company has no components
          of  Comprehensive  Income,  as  defined  by SFAS  130,  which  are not
          contained in net income as reported on the  accompanying  Consolidated
          Statements  of  Income.   Certain  amounts  for  1997  and  1996  were
          reclassified to conform to the current year presentation.

          Pervasiveness of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make 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.  Additionally,  such  estimates and
          assumptions  affect the  reported  amounts of  revenues  and  expenses
          during the reporting  period.  Actual  results could differ from those
          estimates.

                                      F-6

<PAGE> 34

          Earnings Per Share

          Effective December 31, 1997 the Company adopted Statement of Financial
          Accounting  Standards  No.  128,  "Earnings  Per  Share"  (SFAS  128).
          Accordingly,  the Company has disclosed  earnings per share calculated
          using both the basic and diluted methods for all periods presented.  A
          reconciliation of basic and diluted per-share computations is included
          in Note 10 to the financial statements.

          On June 24, 1996,  the Board of  Directors of the Company  announced a
          three-for-two  stock split  effected  in the form of a stock  dividend
          paid on July 15, 1996 to all common  shareholders of record as of July
          5,  1996.  All per  share  and  related  amounts  contained  in  these
          financial  statements  and notes have been  adjusted  to reflect  this
          stock split.

          Cash and Cash Equivalents

          Cash and cash  equivalents  include  all  deposits in banks and highly
          liquid temporary cash investments  purchased with original  maturities
          of three months or less at the time of purchase.

          Marketable Securities

          The Company classifies  securities with a stated maturity which it has
          the intent to hold to maturity, as "held-to-maturity" and records such
          securities  at  amortized  cost.  Securities  which do not have stated
          maturities  or for which the Company  does not have the intent to hold
          to maturity are  classified  as  "available-for-sale"  and recorded at
          fair value,  with  unrealized  holding  gains or losses,  if material,
          recorded as a separate component of Shareholders'  Equity. The Company
          does not invest in trading  securities.  All  securities are accounted
          for on a specific identification basis.

          The Company's marketable  securities are concentrated in securities of
          the U.S. Government and U.S. Government Agencies. Such investments are
          supported by the financial  stability and credit standing of the U. S.
          Government or applicable U. S. Government Agency.

          Merchandise Inventory

          Inventory is valued at the lower of cost or market. Cost is determined
          on the first-in, first-out method.

          Property and Equipment

          Property  and  equipment  are stated at cost.  The Company  calculates
          depreciation using the straight-line  method with useful lives ranging
          from 2 to 25 years.  Expenditures  for major renewals and improvements
          that extend the useful life of property and equipment are capitalized.
          Expenditures  for  maintenance  and  repairs are charged to expense as
          incurred.

          Advertising 

          Advertising  costs are  charged to  expense  in the  period  incurred.
          Cooperative   reimbursements  from  vendors,   which  are  earned  and
          available,   are  recorded  in  the  period  the  related  advertising


<PAGE> 35

          expenditure is incurred.  Advertising expense, included in selling and
          administrative expenses net of cooperative  reimbursements earned, was
          approximately  $12,400,000,  $16,200,000  and $8,900,000 for the years
          ended December 31, 1998, 1997 and 1996, respectively.

          Stock-Based Compensation

          In accordance  with  Statement of Financial  Accounting  Standards No.
          123, "Accounting for Stock Based Compensation" (SFAS 123), the Company
          accounts for its 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.  See Note 9 for  disclosure  of the  Company's  stock
          based compensation plans in accordance with SFAS 123.

          Fair Value of Financial Instruments

          The  Company  estimates  that  the  fair  market  value  of all of its
          financial instruments at December 31, 1998 and 1997 are not materially
          different  from the  aggregate  carrying  value due to the short  term
          nature of these instruments.

          Treasury Shares

          During  1998,  the  Company's   Board  of  Directors   authorized  the
          repurchase  of up to 1  million  shares  of its  common  stock in open
          market transactions.  The Company repurchased a total of 50,000 shares
          during the third quarter for approximately  $2.1 million.  The Company
          intends to hold the shares in treasury for general corporate purposes,
          including  issuances  under various  employee stock option plans.  The
          Company accounts for the treasury shares using the cost method.

3.        Marketable Securities

          The  amortized  cost  and  estimated  fair  values  of  the  Company's
          investments in marketable securities at December 31, 1998 and 1997 (in
          thousands) were:


<TABLE>
<CAPTION>

                                                                                      Gross
                                                                                    Unrealized
                                                                Estimated            Holding             Amortized
           Security Type                                       Fair Value      Gains         Losses         Cost
           -------------                                       ----------      --------------------      ---------
           <S>                                                    <C>          <C>           <C>         <C>
           December 31, 1998
           Available-for-sale:
               U.S. Government and Government Agency              $  2,004     $    4        $    -      $  2,000
               securities
                                                              -------------------------------------------------------

           Held-to-maturity:
               Bonds of states, municipalities, and                    512                        -           510
               political subdivisions                                               2
               U.S. Government and Government Agency                63,963         45          (30)        63,948
               securities
                                                              -------------------------------------------------------
               Total held-to-maturity                                              47          (30)        64,458
                                                                    64,475
                                                              -------------------------------------------------------
                                                              =======================================================
           Total marketable securities:                           $ 66,479     $   51     $    (30)      $ 66,458
                                                              =======================================================

           December 31, 1997 
           Available-for-sale:
               Redemptive tax-exempt preferred stocks             $  7,250     $    -     $      -       $  7,250
                                                              -------------------------------------------------------

           Held-to-maturity: 
               Bonds of states, municipalities, and                    263          1            -            262
               political subdivisions                                              
               U.S. Government and Government Agency                                                        
               securities                                           53,614          -          (66)        53,680   
                                                              -------------------------------------------------------
               Total held-to-maturity                                                                         
                                                                    53,877          1          (66)        53,942
                                                              -------------------------------------------------------
                                                              =======================================================
           Total marketable securities:                           $ 61,127     $    1      $   (66)      $ 61,192
                                                              =======================================================

</TABLE>

<PAGE> 36

          The Company's  investments in securities  held-to-maturity at December
          31,  1998  and 1997  were  all due in one year or less by  contractual
          maturity.  Estimated fair values of marketable securities are based on
          quoted market prices.


4.       Property, Equipment and Facility Relocation

         Property and equipment consists of the following (in thousands):

                                                            December 31,
                                                            ------------
                                                     1998                1997
                                             -----------------------------------
               Land                              $   10,367          $    6,272
               Machinery and equipment               11,001               9,316
               Building                              12,495               8,276
               Computer and data processing
                equipment                             7,502               3,596
               Furniture and fixtures                 1,882               1,246
               Computer software                      1,341               1,049
               Leasehold improvements                   390                 390
               Construction in progress                 728                 451
                                             ---------------     ---------------
                                                     45,706              30,596
               Less accumulated depreciation          8,650               3,892
                                             ---------------     ---------------
               Net property and equipment        $   37,056          $   26,704
                                             ===============     ===============

          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.

          In March 1998, the Company  acquired  approximately 18 acres of vacant
          land  contiguous to its Vernon Hills  facility for $4.1  million.  The
          Company now owns  approximately 45 total acres. The Company  completed
          construction  of  a  100,000  square  foot  addition  to  its  current
          warehouse facility in September 1998,  leaving  approximately 18 acres
          available for future expansion.

5.        Financing Arrangements

          The  Company  has an  aggregate  $50  million  available  pursuant  to
          unsecured lines of credit with two financial  institutions expiring in
          June  1999,  at which  time the  Company  intends  to renew the lines.
          Borrowings under one of the lines bear interest at the prime rate less
          2.5%,  LIBOR rate plus 0.5% or the  federal  funds rate plus 0.5%,  as
          determined by the Company. Borrowings under the second credit facility
          bear  interest  at the prime rate less 2.5%,  LIBOR rate plus 0.45% or
          the federal funds rate plus 0.45%,  as  determined by the Company.  At
          December 31, 1998 and 1997, there were no borrowings from these credit
          facilities.

          In October 1998 the Company  established an unsecured  stand-by letter
          of credit for  approximately  $160,000  related to improvements to the
          Vernon Hills facility which expires in June 1999.

6.        Trade Financing Agreements

          The  Company  has  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  allow for a maximum  credit line of
          $33.9 million  collateralized by inventory  purchases  financed by the
          Flooring  Companies.  At December 31, 1998 and 1997,  the Company owed
          the Flooring  Companies a total of approximately $6.7 million and $7.2
          million, respectively, which is included in trade accounts payable.

<PAGE> 37


7.        Operating Leases and Exit Costs

          The Company is obligated under a lease agreement  through December 31,
          2003 for its Buffalo Grove office and warehouse facility.  The Company
          is also  obligated  under a lease  agreement for its Chicago  showroom
          which  expires on June 30, 2001.  In addition to the Chicago  showroom
          rental costs,  the Company is subject to a proportionate  share of any
          increase  in real  estate  taxes and  operating  costs  over a certain
          amount per square foot.

          For the years ended December 31, 1998,  1997 and 1996 rent expense was
          $230,000, $540,000 and $923,000, respectively.  Additionally, $689,000
          and $379,000 of rental  payments were charged to the exit liability in
          1998 and 1997, respectively. Minimum future rentals are as follows (in
          thousands):

          Years Ended December 31,                              Amount
          ------------------------                        -----------------
          1999                                                   $    1,028
          2000                                                        1,028
          2001                                                          931
          2002                                                          873
          2003                                                          873
          Thereafter                                                      -
                                                          -----------------
                                                                 $    4,733
                                                          =================

          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.  During 1998 and 1997 the
          Company charged  approximately  $676,000 and $974,000 against the exit
          accrual,  respectively.  These amounts include cash payments for rent,
          real estate taxes and  restoration,  net of sublease  payments,  which
          totaled $676,000 in 1998 and $469,000 in 1997. During 1997 the Company
          charged approximately $505,000 of asset write offs to the exit accrual
          and  reclassified  various accruals for operating costs related to the
          vacated facility, totaling $378,000, to the exit liability.

          In the fourth  quarter of 1998 the  Company  reopened a portion of the
          Buffalo Grove facility as a  telemarketing  center.  Accordingly,  the
          Company records a proportionate  share of the rent and other operating
          costs to selling and  administrative  expenses.  The Company  plans to
          occupy the Buffalo Grove facility while it finalizes  future long term
          growth plans for its Vernon Hills campus.  There is no assurance  that
          the remaining exit liability of $2.7 million at December 31, 1998 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.

<PAGE> 38

8.        Income Taxes

          Components of the  provision  (benefit) for income taxes for the years
          ended December 31, 1998, 1997 and 1996 consist of (in thousands):

          Current:                         1998          1997          1996
                                       ------------  ------------  ------------
          Federal                      $   35,968     $   28,630    $   20,978
          State                             7,922          6,228         4,734
                                       ------------  ------------  ------------
                                           43,890         34,858        25,712
          Deferred                           (720)        (1,351)       (3,228)
                                       ------------  -----------   ------------
          Provision for income taxes   $   43,170     $   33,507    $   22,484
                                       ============  ============  ============

          The current income tax  liabilities  for 1998 and 1997 were reduced by
          $3.7 million and $5.8 million, respectively, for tax benefits recorded
          directly to paid-in  capital  relating to the  exercise and vesting of
          shares  pursuant to the CDW Stock  Option  Plan,  the MPK Stock Option
          Plan and the MPK Restricted Stock Plan.

          The  reconciliation  between the  statutory  tax rate  expressed  as a
          percentage of income before income taxes and the actual  effective tax
          rate for 1998, 1997 and 1996 is as follows:

                                                   1998        1997        1996
                                                  ------      ------      ------
             Statutory federal income tax rate    35.0 %      35.0 %      35.0 %
             State taxes, net of federal benefit   4.6         4.6         4.7
             Other                                 0.0         0.1        (0.2)
                                                  ------      ------      ------
                                                  39.6 %      39.7 %      39.5 %
                                                  ======      ======      ======


          The tax  effect  of  temporary  differences  that give rise to the net
          deferred  income tax asset at December 31, 1998 and 1997 are presented
          below (in thousands):

                                                     1998               1997
                                                   ---------         ----------
          Current:
             Accounts receivable                   $   1,827         $   1,385
             Merchandise inventory                       333               344
             Accrued expenses                          2,921             1,858
                                                   ----------        ----------
                                                       5,081             3,587
                                                   ----------        ----------
          Non-current:
             Employee stock plans                      4,238             3,800
             Exit charge                               1,059             1,322
             Other                                      (441)              508
                                                   ----------        ----------
                                                       4,856             5,630
                                                   ----------        ----------
             Net deferred tax asset                $   9,937         $   9,217
                                                   ==========        ==========


<PAGE> 39

          The portion of the net deferred tax asset  relating to employee  stock
          plans   results   primarily   from  the  MPK  Stock  Option  Plan  and
          compensatory  stock option  grants  under the CDW Stock Option  Plans.
          Compensation  expense  related to these plans is deductible for income
          tax purposes in the year the options are exercised.

          Although realization is not assured,  management believes,  based upon
          historical taxable income, that it is more likely than not that all of
          the deferred tax asset will be realized.

9.        Stock-Based Compensation   

          CDW Stock Option Plans

          The Company has established certain stock-based compensation plans for
          the benefit of its  directors and  coworkers.  Pursuant to these plans
          the Company has reserved a total of 4,134,068  common shares for stock
          option grants. The plans generally include vesting requirements from 3
          to 10 years and option  lives of 20 years.  Options  may be granted at
          exercise  prices  ranging from $0.01 to the market price of the common
          stock at the date of grant.

          Option  activity for the years ended December 31, 1996,  1997 and 1998
          was as follows:

<TABLE>
<CAPTION>


                                              Weighted-Average         Options
                                                   Shares           Exercise Price       Exercisable
                                              ----------------      --------------      -------------
          <S>                                     <C>               <C>                 <C>

          Balance at January 1, 1996                537,810         $      24.81                   -

          Options granted                           590,685                56.10
          Options exercised                               -                    -
          Options forfeited                          74,151                24.93
                                               ---------------      ---------------     --------------

          Balance at December 31, 1996            1,054,344                42.33                   -
                                               ---------------      --------------      --------------

          Options granted                           859,759                52.33
             Options exercised                            -                    -
             Options forfeited                       82,184                47.51
                                               ---------------      --------------      --------------

          Balance at December 31, 1997            1,831,919                46.79              44,737
                                               ---------------      --------------      --------------

             Options granted                        714,115                92.76
             Options exercised                       45,872                24.87
             Options forfeited                      115,035                50.50
                                               ---------------      ---------------     ---------------

          Balance at December 31, 1998            2,385,127         $      60.80             113,045
                                               ===============      ===============     ===============

</TABLE>

<PAGE> 40

          For  the  years  ended   December  31,  1998,   1997  and  1996,   the
          weighted-average fair value of options granted was as follows:
<TABLE>
<CAPTION>


                                                            1998        1997        1996
                                                           ------      ------      ------
             <S>                                           <C>         <C>         <C>
             Exercise price equals market price            $65.99      $36.18      $42.08
             Exercise price is less than market price      $95.93      $52.12      $42.45

</TABLE>
          The following table summarizes the status of outstanding stock options
          as of December 31, 1998:

<TABLE>
<CAPTION>

                                         Options Outstanding                     Options Exercisable
                           -------------------------------------------------  ---------------------------
                                          Weighted-Average
                            Number of        Remaining         Weighted-      Number of     Weighted-
             Range of        Options      Contractual Life      Average        Options       Average
          Exercise Prices  Outstanding       (in years)      Exercise Price  Exercisable  Exercise Price
          ---------------- ------------- ------------------- --------------- ------------ ---------------
          <S>              <C>           <C>                 <C>             <C>          <C>

               $0.01             34,068                19.0  $         0.01            -               -

          $9.33 - $13.00         12,300                16.0           11.38        1,500           12.30

          $22.75 - $27.00       376,205                16.4           25.31      111,545           25.03

          $40.00 - $59.31     1,278,611                18.4           54.82            -               -

          $64.81 - $95.94       683,943                20.0           95.48            -               -
          ---------------- ------------- ------------------- --------------- ------------ ---------------

          $0.01 - $95.94      2,385,127                18.5     $     60.80      113,045  $        24.86
          ================ ============= =================== =============== ============ ===============

</TABLE>


          Had the  Company  elected  to apply the  provisions  of  Statement  of
          Financial  Accounting  Standards No. 123,  "Accounting for Stock Based
          Compensation" (SFAS 123) regarding recognition of compensation expense
          to the extent of the calculated fair value of stock options,  reported
          net income and earnings per share would have been reduced as follows:

<TABLE>
<CAPTION>


                                                                   (in 000's, except per share amounts)
                                                                 1998               1997              1996
                                                             -------------      -------------     -------------
             <S>                                                <C>                <C>               <C>
             Net income, as reported                            $  65,841          $  51,001         $  34,400
             Pro forma net income                               $  61,574          $  48,573         $  33,931

             Basic earnings per share, as reported              $    3.06          $    2.37         $    1.60
             Diluted earnings per share, as reported            $    3.03          $    2.35         $    1.58

             Pro forma basic earnings per share                 $    2.86          $    2.26         $    1.58
             Pro forma diluted earnings per share               $    2.84          $    2.25         $    1.56

</TABLE>


          The effects of applying SFAS 123 in the above pro forma disclosure are
          not  likely to be  representative  of the effects disclosed  in future
          years because the proforma  calculations exclude stock options granted
          before 1995.

<PAGE> 41

          For  purposes  of the SFAS 123 pro forma net income and  earnings  per
          share calculation, the fair value of each option grant is estimated as
          of the date f grant using the Black-Scholes  option-pricing model. The
          weighted-average   assumptions  used  in  determining  fair  value  as
          disclosed for SFAS 123 are shown in the following table:

                                                1998          1997         1996
                                               ------        ------       ------
            Risk-free interest rate             5.4 %         5.5 %        6.6 %
            Dividend yield                      0.0 %         0.0 %        0.0 %
            Option life (years)                 9.9           9.9         10.3
            Stock price volatility             52.6 %        51.7 %       48.2 %



         MPK Stock Option Plan

          Effective   December  31,  1992,   the  Company's   current   majority
          shareholder established the MPK Stock Option Plan pursuant to which he
          granted  non-forfeitable  options  to  certain  officers  to  purchase
          4,143,375  shares of common stock owned by him at an exercise price of
          $.017 per share.  Options were exercised and the resulting shares were
          sold pursuant to secondary offerings in 1995 and 1997, and open market
          transactions in 1998, as follows:

               Transaction Date         Number of Options
               ----------------         -----------------
                           1995                   338,000
                           1997                   136,000
                           1998                   165,000

          Subsequent  to December 31, 1998,  one of the plan  participants,  who
          holds  244,755  options,   terminated  employment  with  the  Company.
          Pursuant to the terms of the MPK Stock  Option Plan,  the  participant
          has 180 days to exercise  all  remaining  options.  Additionally,  the
          Company's  majority  shareholder has 90 days from the date of exercise
          to elect to  acquire  the shares at market  value with a note  payable
          with interest over ten years.  Options for 892,710  shares for the two
          remaining participants are exercisable as of December 31, 1998 and the
          remaining  1,904,998 options are exercisable at the rate of 571,501 on
          each  December 31  hereafter  until all options are  exercisable.  The
          options  have a 20  year  life.  The  number  of  options  exercisable
          increase  proportionately  to  shares,  if any,  sold by the  majority
          shareholder.

<PAGE> 42

          MPK Restricted Stock Plan

          Effective upon the closing of the initial public offering, the current
          majority  shareholder  established  the  MPK  Restricted  Stock  Plan.
          Pursuant to this plan,  the  majority  shareholder  allocated  668,604
          shares of his  common  stock to be held in escrow  for the  benefit of
          those  persons  employed by the Company as of December 31,  1992.  The
          number of shares  allocated to each  employee was  dependent  upon the
          employee's  years of service and salary history.  As a result of these
          grants,  which provided for vesting based upon  continuous  employment
          with the  Company or its  subsidiaries  through  January 1, 2000,  the
          Company recorded a capital contribution and offsetting deferred charge
          of approximately  $2.8 million for unearned  compensation equal to the
          number of shares granted,  times $4.17 per share.  The deferred charge
          is classified in the equity section of the consolidated  balance sheet
          of the Company as unearned  compensation  and is being  amortized on a
          straight-line  basis over the vesting period. As of December 31, 1998,
          126,516  shares have been forfeited for which the Company has recorded
          a reduction of both  unearned  compensation  and paid-in  capital,  in
          addition  to  reducing  the  amortization  of  unearned   compensation
          accordingly.

          The Company  filed a  Registration  Statement  on Form S-3,  which was
          effective  on  February  7,  1997,  to  modify  the  terms  of the MPK
          Restricted   Stock  Plan  and  provide   participants  the  option  to
          accelerate  the  vesting on 25% of their  shares in  exchange  for the
          extension  of the vesting  period on their  remaining  shares  through
          2003. Under the terms of this  modification,  participants who elected
          the  acceleration  were  granted  options by the Company  equal to the
          number of shares which became vested with an exercise  price of $59.00
          per share,  the market  price of the stock on the  acceleration  date.
          Participants  elected  accelerated vesting under this modification for
          132,064 shares.

          As of December 31, 1998,  26,517 shares remain  outstanding  under the
          original  terms and vest on January 1, 2000 and 383,507  shares remain
          outstanding  under the modified terms and vest 25% each year beginning
          on January 1, 2000.

          MPK Stock Plans, Tax Benefits

          The  exercise  and vesting of shares  pursuant to the MPK Stock Option
          Plan and MPK Restricted  Stock Plan resulted in the realization by the
          Company of tax  benefits of $3.1  million in 1998 and $6.2  million in
          1997, of which $144,000 and $334,000,  respectively,  were  previously
          recorded in  deferred  taxes.  The  incremental  tax  benefits of $2.9
          million  in 1998 and $5.8  million  in 1997 were  recorded  to paid-in
          capital.

<PAGE> 43

10.       Earnings Per Share

          The  Company has  outstanding  at  December  31,  1998  common  shares
          totaling  approximately  21,521,000.  The  Company  has  also  granted
          options to purchase  common  shares to the coworkers of the Company as
          discussed  in Note 9.  These  options  have a  dilutive  effect on the
          calculation of earnings per share.  The following is a  reconciliation
          of the numerators and  denominators of the basic and diluted  earnings
          per share computations as required by SFAS 128.

<TABLE>
<CAPTION>
                                                                      Years ended December 31,
                                                            --------------------------------------------          
                                                               1998             1997             1996
                                                            --------------------------------------------
             <S>                                            <C>              <C>             <C>
             Basic earnings per share:
             Income available to
                  Common shareholders (numerator)             $ 65,841         $ 51,001         $ 34,400
                                                            ===========      ===========     ============
             Weighted average common
                  Shares outstanding (denominator)              21,531           21,525           21,525
                                                            ===========      ===========     ============
             Basic earnings per share                          $  3.06          $  2.37          $  1.60
                                                            ===========      ===========     ============

             Diluted earnings per share:
             Income available to
                  common shareholders (numerator)             $ 65,841         $ 51,001         $ 34,400
                                                            ===========      ===========     ============
             Weighted average common
                  shares outstanding                            21,531           21,525           21,525
             Effect of dilutive securities:
                  Options on common stock                          221              179              260
                                                            -----------      -----------     ------------
             Total common  shares and dilutive  securities      21,752           21,704           21,785
             (denominator)
                                                            ===========      ===========     ============
             Diluted earnings per share                        $  3.03          $  2.35          $  1.58
                                                            ===========      ===========     ============

</TABLE>
11.       Profit Sharing and 401(k) Plan

          The  Company  has a  profit  sharing  plan  which  includes  a  salary
          reduction feature  established under the Internal Revenue Code Section
          401(k)  covering  substantially  all employees.  Contributions  by the
          Company to the profit sharing plan are determined at the discretion of
          the Board of Directors.  For the years ended  December 31, 1998,  1997
          and 1996,  the  Company's  profit  sharing  expense was  approximately
          $1,860,000, $1,066,000 and $662,000, respectively.

12.       Contingencies

          In December  1998,  the Company and Michael P.  Krasny,  its  majority
          shareholder, Chairman and CEO, agreed to settle the litigation brought
          against them in 1993 by a former  shareholder,  director and executive
          officer of the  Company.  The  lawsuit  was  related to the  Company's
          redemption of the common stock held by the former  shareholder in July
          1990, and requested actual and punitive damages.  Although the Company
          and Mr.  Krasny  believe their actions were honest and proper and that
          the allegations  were without merit,  they agreed to the settlement of
          the suit, whereby all pending litigation was dismissed with a one time
          payment by Mr. Krasny to the former  shareholder of approximately $4.4
          million.  The amount was determined based upon the difference  between
          the agreed upon estimated fair market value of the Company at the time
          of the redemption of the former shareholder's interest in 1990 and the
          amount  previously  paid to the former  shareholder.  Pursuant  to Mr.
          Krasny's  indemnification  of the  Company  for all costs,  damages or
          settlements  related  to the  litigation,  the  Company  recorded  the
          payment  by  Mr.  Krasny  to  the  former  shareholder  as  a  capital
          contribution,  with an offsetting reduction of paid-in capital for the
          additional redemption price paid to the former shareholder.  Thus, the
          settlement  had no impact on the  Company's  results of  operations or
          cash flows.

          The majority shareholder also reimbursed the Company for all expenses,
          net of tax benefits  received by the Company,  related to this action.
          For the years ended December 31, 1998,  1997 and 1996, the Company and
          majority  shareholder  incurred legal expenses of  approximately  $1.3
          million, $379,000 and $133,000,  respectively, which have been assumed
          by the majority  shareholder.  These legal  expenses are recorded as a
          selling and administrative expense and the reimbursement,  net of tax,
          is  recorded as an  increase  to paid-in  capital.  As a result of the
          settlement  the Company does not  anticipate  incurring any additional
          expenses related to this lawsuit.
<PAGE> 44

13.       Selected Quarterly Financial Data (Unaudited)

          The following information is for the years ended December 31, 1998 and
          1997 (in thousands, except per share data):


                            `    First        Second         Third       Fourth
                               Quarter       Quarter       Quarter      Quarter
                              ---------     ---------     ---------    ---------
December 31, 1998
Net sales                     $ 384,591     $ 408,945     $462,720     $477,233
Gross profit                     49,147        51,707       58,863       60,458
Income before income taxes       24,453        25,807       28,384       30,367
Net income                       14,770        15,588       17,141       18,342
Earnings per Share:
   Basic                      $    0.69     $    0.72     $   0.80     $   0.85
   Diluted                    $    0.68     $    0.72     $   0.79     $   0.84

December 31, 1997
Net sales                     $ 297,777     $ 304,545     $323,901     $350,706
Gross profit                     39,943        41,657       42,980       46,225
Income before income taxes       18,822        21,043       21,543       23,100
Net income                       11,359        12,700       13,001       13,941
Earnings per Share:
   Basic                      $    0.53     $    0.59     $   0.60     $   0.65
   Diluted                    $    0.52     $    0.59     $   0.60     $   0.64


<PAGE> 45




                        REPORT OF INDEPENDENT ACCOUNTANTS





To the Board of Directors
CDW Computer Centers, Inc.

Our report on the  consolidated  financial  statements of CDW Computer  Centers,
Inc. and  Subsidiaries  is included on page F-1 of this Form 10-K. In connection
with our audits of such financial  statements,  we have also audited the related
financial statement schedule listed in the index on page 20 of this Form 10-K.

In our  opinion,  the  financial  statement  schedule  referred  to above,  when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.

PricewaterhouseCoopers LLP

Chicago, Illinois 
January 21, 1999










                                      S-1


<PAGE> 46

                           CDW COMPUTER CENTERS, INC.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                  years ended December 31, 1998, 1997 and 199
                                 (in thousands)

<TABLE>
<CAPTION>



                   Column A                       Column B              Column C               Column D         Column E
                   --------                      ----------     -------------------------     ----------       ----------

                                                 Balance at     Charged to     Charged to                      Balance at
                                                 Beginning      Costs and        Other                            End
                 Description                     of Period       Expenses       Accounts      Deductions       of Period
                 -----------                     ----------     ----------     ----------     ----------       ----------
<S>                                              <C>            <C>            <C>            <C>              <C>
Year ended  December  31, 1998 
  Deducted in the balance sheet 
  from the asset to which it applies:
  Allowance for doubtful accounts                $    1,950     $    2,129     $        -     $      894 (a)   $    3,185
                                                 ----------     ----------     ----------     ----------       ----------
Year ended  December  31, 1997  
  Deducted in the balance  sheet 
  from the asset to
  which it applies:
  Allowance for doubtful accounts                $    1,100     $    1,166     $        -     $      316 (a)   $    1,950
                                                 ----------     ----------     ----------     ----------       ----------

Year ended  December  31, 1996 
  Deducted in the balance sheet 
  from the asset to which it applies:
  Allowance for doubtful accounts                $      625     $      517     $        -     $       42 (a)   $    1,100
                                                 ----------     ----------     ----------     ----------       ----------



</TABLE>


Note:

(a) Uncollectible items written off, less recoveries of items previously written
off.


                                      S-2