Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

Segment Information

11. Segment Information

Segment information is presented in accordance with a "management approach," which designates the internal reporting used by the chief operating decision-maker for making decisions and assessing performance as the source of the Company's reportable segments. The Company's segments are organized in a manner consistent with which separate financial information is available and evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance.

The Company has two reportable segments: Corporate, which is comprised primarily of business customers, and Public, which is comprised of government entities and education and healthcare institutions. The Company also has two other operating segments, CDW Advanced Services and Canada, which do not meet the reportable segment quantitative thresholds and, accordingly, are combined together as "Other."

The Company has centralized logistics and headquarters functions that provide services to the segments. The logistics function includes purchasing, distribution and fulfillment services to support both the Corporate and Public segments. As a result, costs and intercompany charges associated with the logistics function are fully allocated to both of these segments based on a percent of sales. The centralized headquarters function provides services in areas such as accounting, information technology, marketing, legal and coworker services. Headquarters' function costs that are not allocated to the segments are included under the heading of "Headquarters" in the tables below.

The Company allocates resources to and evaluates performance of its segments based on both net sales and Adjusted EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA, which is a measure defined in the Company's credit agreements, means EBITDA adjusted for certain items which are described in the reconciliation table below. Management evaluates the performance of each segment on the basis of Adjusted EBITDA as the primary metric for measuring segment profitability. Management believes that EBITDA and Adjusted EBITDA, both non-GAAP financial measures, represent a useful measure for evaluating the Company's performance because it reflects earnings trends without the impact of certain non-cash related expenses or income.

Analysts, investors and rating agencies frequently use EBITDA for performance measurement purposes, but the Company's presentation of EBITDA is not necessarily comparable to other similarly titled measures because of potential inconsistencies in the method of calculation. EBITDA is not intended as an alternative to net income (loss) as an indicator of the Company's operating performance, or as an alternative to any other measure of performance calculated in conformity with GAAP. Segment information for total assets and capital expenditures is not presented as such information is not used in measuring segment performance or allocating resources between segments.

Selected Segment Financial Information

The following table presents information about the Company's segments for the three and six months ended June 30, 2011 and 2010:

(in millions)	Corporate			Public			Other			Headquarters			Total
Three Months Ended June 30, 2011:
Net sales	$	1,338.4		$	951.2		$	122.5		$	—		$	2,412.1
Income (loss) from operations		87.7			61.0			4.4			(24.9	)		128.2
Adjusted EBITDA		118.1			75.8			6.6			(13.0	)		187.5
Amortization expense		(23.4	)		(10.9	)		(0.8	)		(8.2	)		(43.3	)
Three Months Ended June 30, 2010:
Net sales	$	1,193.4		$	930.9		$	99.0		$	—		$	2,223.3
Income (loss) from operations		66.5			55.1			3.9			(29.9	)		95.6
Adjusted EBITDA		97.8			70.6			6.4			(15.7	)		159.1
Amortization expense		(23.4	)		(10.8	)		(0.7	)		(7.8	)		(42.7	)
Six Months Ended June 30, 2011:
Net sales	$	2,617.7		$	1,675.1		$	248.9		$	—		$	4,541.7
Income (loss) from operations		166.0			98.1			8.0			(52.2	)		219.9
Adjusted EBITDA		227.6			127.8			12.4			(24.8	)		343.0
Amortization expense		(46.9	)		(21.7	)		(1.6	)		(16.1	)		(86.3	)
Six Months Ended June 30, 2010:
Net sales	$	2,310.1		$	1,651.2		$	196.1		$	—		$	4,157.4
Income (loss) from operations		125.4			89.2			7.0			(54.7	)		166.9
Adjusted EBITDA		187.9			119.7			12.0			(27.3	)		292.3
Amortization expense		(46.9	)		(21.7	)		(1.5	)		(15.3	)		(85.4	)

The following table presents a reconciliation of total Adjusted EBITDA to total loss before income taxes for the three and six months ended June 30, 2011 and 2010:

(in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Adjusted EBITDA	$	187.5		$	159.1		$	343.0		$	292.3
Adjustments to reconcile Adjusted EBITDA to loss before income taxes:
Depreciation and amortization		(50.8	)		(52.7	)		(102.4	)		(105.1	)
Interest expense, net		(65.7	)		(106.4	)		(157.8	)		(183.5	)
Non-cash equity-based compensation		(4.1	)		(4.1	)		(8.1	)		(8.4	)
Sponsor fee		(1.3	)		(1.3	)		(2.5	)		(2.5	)
Consulting and debt-related professional fees		(0.1	)		(2.9	)		(4.1	)		(5.6	)
Net (loss) gain on extinguishments of long-term debt		(115.7	)		—			(118.9	)		9.2
Other adjustments (1)		(3.0	)		(2.6	)		(5.5	)		(3.7	)
Loss before income taxes	$	(53.2	)	$	(10.9	)	$	(56.3	)	$	(7.3	)

⁽¹⁾  Other adjustments include certain severance and retention costs and equity investment losses.