ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 26-0273989 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 N. Milwaukee Avenue Vernon Hills, Illinois | 60061 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Page | ||
PART I | FINANCIAL INFORMATION | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | OTHER INFORMATION | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
SIGNATURES |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per-share amounts) | |||||||
June 30, 2013 | December 31, 2012 | ||||||
Assets | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 179.3 | $ | 37.9 | |||
Accounts receivable, net of allowance for doubtful accounts of $5.4 and $5.4, respectively | 1,390.5 | 1,285.0 | |||||
Merchandise inventory | 378.5 | 314.6 | |||||
Miscellaneous receivables | 165.1 | 148.5 | |||||
Deferred income taxes | 12.1 | 14.1 | |||||
Prepaid expenses and other | 108.2 | 34.6 | |||||
Total current assets | 2,233.7 | 1,834.7 | |||||
Property and equipment, net | 132.7 | 142.7 | |||||
Goodwill | 2,207.4 | 2,209.3 | |||||
Other intangible assets, net | 1,403.7 | 1,478.5 | |||||
Deferred financing costs, net | 41.4 | 53.2 | |||||
Other assets | 1.6 | 1.6 | |||||
Total assets | $ | 6,020.5 | $ | 5,720.0 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable—trade | $ | 771.0 | $ | 518.6 | |||
Accounts payable—inventory financing | 282.5 | 249.2 | |||||
Current maturities of long-term debt | 13.5 | 40.0 | |||||
Deferred revenue | 96.9 | 57.8 | |||||
Accrued expenses: | |||||||
Compensation | 93.7 | 99.4 | |||||
Interest | 47.0 | 50.7 | |||||
Sales taxes | 20.2 | 22.6 | |||||
Advertising | 23.7 | 33.9 | |||||
Income taxes | 5.6 | 0.2 | |||||
Other | 91.1 | 95.8 | |||||
Total current liabilities | 1,445.2 | 1,168.2 | |||||
Long-term liabilities: | |||||||
Debt | 3,710.9 | 3,731.0 | |||||
Deferred income taxes | 598.3 | 624.3 | |||||
Accrued interest | 6.4 | 8.0 | |||||
Other liabilities | 50.7 | 52.0 | |||||
Total long-term liabilities | 4,366.3 | 4,415.3 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Preferred shares, $0.01 par value, 100.0 and no shares authorized, respectively; no shares issued or outstanding for both periods | — | — | |||||
Common shares, $0.01 par value, 1,000.0 and 286.1 shares authorized, respectively; 145.2 shares issued for both periods; 145.2 and 145.1 shares outstanding, respectively | 1.4 | 1.4 | |||||
Paid-in capital | 2,211.0 | 2,207.7 | |||||
Accumulated deficit | (1,998.1 | ) | (2,073.0 | ) | |||
Accumulated other comprehensive (loss) income | (5.3 | ) | 0.4 | ||||
Total shareholders’ equity | 209.0 | 136.5 | |||||
Total liabilities and shareholders’ equity | $ | 6,020.5 | $ | 5,720.0 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) (unaudited) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | $ | 2,779.3 | $ | 2,584.7 | $ | 5,191.0 | $ | 4,903.9 | ||||||||
Cost of sales | 2,327.7 | 2,157.8 | 4,337.4 | 4,092.4 | ||||||||||||
Gross profit | 451.6 | 426.9 | 853.6 | 811.5 | ||||||||||||
Selling and administrative expenses | 266.4 | 259.5 | 517.9 | 511.1 | ||||||||||||
Advertising expense | 31.6 | 31.0 | 62.0 | 60.4 | ||||||||||||
Income from operations | 153.6 | 136.4 | 273.7 | 240.0 | ||||||||||||
Interest expense, net | (70.3 | ) | (76.9 | ) | (142.4 | ) | (155.8 | ) | ||||||||
Net loss on extinguishments of long-term debt | (10.3 | ) | — | (14.2 | ) | (9.4 | ) | |||||||||
Other income, net | 0.2 | 0.2 | 0.6 | — | ||||||||||||
Income before income taxes | 73.2 | 59.7 | 117.7 | 74.8 | ||||||||||||
Income tax expense | (26.5 | ) | (22.9 | ) | (42.7 | ) | (27.1 | ) | ||||||||
Net income | $ | 46.7 | $ | 36.8 | $ | 75.0 | $ | 47.7 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.32 | $ | 0.25 | $ | 0.52 | $ | 0.33 | ||||||||
Diluted | $ | 0.32 | $ | 0.25 | $ | 0.51 | $ | 0.33 | ||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||
Basic | 145.3 | 145.1 | 145.2 | 145.0 | ||||||||||||
Diluted | 146.7 | 145.8 | 146.5 | 145.8 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income | $ | 46.7 | $ | 36.8 | $ | 75.0 | $ | 47.7 | ||||||||
Foreign currency translation adjustment | (3.3 | ) | (1.6 | ) | (5.7 | ) | 0.3 | |||||||||
Other comprehensive (loss) income | $ | (3.3 | ) | $ | (1.6 | ) | $ | (5.7 | ) | $ | 0.3 | |||||
Comprehensive income | $ | 43.4 | $ | 35.2 | $ | 69.3 | $ | 48.0 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (in millions) (unaudited) | ||||||||||||||||||||||||
Total Shareholders’ Equity | Preferred Shares | Common Shares | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | |||||||||||||||||||
Balance at December 31, 2012 | $ | 136.5 | $ | — | $ | 1.4 | $ | 2,207.7 | $ | (2,073.0 | ) | $ | 0.4 | |||||||||||
Equity-based compensation expense | 4.0 | — | — | 4.0 | — | — | ||||||||||||||||||
Repurchase of common shares | (0.1 | ) | — | — | — | (0.1 | ) | — | ||||||||||||||||
Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax | (0.6 | ) | — | — | (0.6 | ) | — | — | ||||||||||||||||
Incentive compensation plan units withheld for taxes | (0.1 | ) | — | — | (0.1 | ) | — | — | ||||||||||||||||
Net income | 75.0 | — | — | — | 75.0 | — | ||||||||||||||||||
Foreign currency translation adjustment | (5.7 | ) | — | — | — | — | (5.7 | ) | ||||||||||||||||
Balance at June 30, 2013 | $ | 209.0 | $ | — | $ | 1.4 | $ | 2,211.0 | $ | (1,998.1 | ) | $ | (5.3 | ) |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) | ||||||||
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 75.0 | $ | 47.7 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 104.3 | 105.7 | ||||||
Equity-based compensation expense | 4.0 | 11.5 | ||||||
Deferred income taxes | (23.5 | ) | (32.0 | ) | ||||
Amortization of deferred financing costs, debt premium, and debt discount, net | 5.3 | 8.0 | ||||||
Net loss on extinguishments of long-term debt | 14.2 | 9.4 | ||||||
Other | — | 0.9 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (108.9 | ) | 19.8 | |||||
Merchandise inventory | (64.0 | ) | 0.1 | |||||
Other assets | (67.2 | ) | (45.3 | ) | ||||
Accounts payable-trade | 253.8 | 170.5 | ||||||
Other current liabilities | 17.8 | 9.2 | ||||||
Long-term liabilities | (3.7 | ) | (0.8 | ) | ||||
Net cash provided by operating activities | 207.1 | 304.7 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (20.0 | ) | (15.7 | ) | ||||
Net cash used in investing activities | (20.0 | ) | (15.7 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings under revolving credit facility | 63.0 | 256.0 | ||||||
Repayments of borrowings under revolving credit facility | (63.0 | ) | (256.0 | ) | ||||
Repayments of long-term debt | (43.4 | ) | (201.0 | ) | ||||
Proceeds from issuance of long-term debt | 1,346.6 | 135.7 | ||||||
Payments to extinguish long-term debt | (1,352.6 | ) | (136.9 | ) | ||||
Payments of debt financing costs | (4.8 | ) | (2.1 | ) | ||||
Net change in accounts payable-inventory financing | 33.3 | (25.5 | ) | |||||
Payment of incentive compensation plan withholding taxes | (23.3 | ) | — | |||||
Repurchase of common shares | (0.1 | ) | (0.3 | ) | ||||
Net cash used in financing activities | (44.3 | ) | (230.1 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (1.4 | ) | (0.1 | ) | ||||
Net increase in cash and cash equivalents | 141.4 | 58.8 | ||||||
Cash and cash equivalents—beginning of period | 37.9 | 99.9 | ||||||
Cash and cash equivalents—end of period | $ | 179.3 | $ | 158.7 | ||||
Supplementary disclosure of cash flow information: | ||||||||
Interest paid | $ | (142.7 | ) | $ | (151.4 | ) | ||
Taxes paid, net | $ | (50.9 | ) | $ | (38.4 | ) |
1. | Description of Business and Summary of Significant Accounting Policies |
2. | Recent Accounting Pronouncements |
3. | Inventory Financing Agreements |
(in millions) | June 30, 2013 | December 31, 2012 | ||||||
Revolving Loan inventory financing agreement | $ | 280.5 | $ | 248.3 | ||||
Other inventory financing agreements | 2.0 | 0.9 | ||||||
Accounts payable-inventory financing | $ | 282.5 | $ | 249.2 |
4. | Long-Term Debt |
(dollars in millions) | Interest Rate (1) | June 30, 2013 | December 31, 2012 | ||||||||
Senior secured asset-based revolving credit facility | — | % | $ | — | $ | — | |||||
Senior secured term loan facility | 3.5 | % | 1,346.6 | 1,339.5 | |||||||
Unamortized discount on senior secured term loan facility | (3.3 | ) | — | ||||||||
Senior secured notes due 2018 | 8.0 | % | 500.0 | 500.0 | |||||||
Senior notes due 2019 | 8.5 | % | 1,305.0 | 1,305.0 | |||||||
Unamortized premium on senior notes due 2019 | 4.6 | 5.0 | |||||||||
Senior subordinated notes due 2017 | 12.535 | % | 571.5 | 621.5 | |||||||
Senior notes due 2015 | — | % | — | — | |||||||
Total long-term debt | 3,724.4 | 3,771.0 | |||||||||
Less current maturities of long-term debt | (13.5 | ) | (40.0 | ) | |||||||
Long-term debt, excluding current maturities | $ | 3,710.9 | $ | 3,731.0 |
5. | Income Taxes |
6. | Shareholders' Equity |
7. | Equity-Based Compensation |
8. | Earnings per Share |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||
Weighted-average shares - basic | 145.3 | 145.1 | 145.2 | 145.0 | |||||||
Effect of dilutive securities | 1.4 | 0.7 | 1.3 | 0.8 | |||||||
Weighted-average shares - diluted | 146.7 | 145.8 | 146.5 | 145.8 |
9. | Deferred Compensation Plan |
10. | Commitments and Contingencies |
11. | Segment Information |
(in millions) | Corporate | Public | Other | Headquarters | Total | |||||||||||||||
Three Months Ended June 30, 2013: | ||||||||||||||||||||
Net sales | $ | 1,537.4 | $ | 1,082.6 | $ | 159.3 | $ | — | $ | 2,779.3 | ||||||||||
Income (loss) from operations | 103.2 | 69.1 | 8.9 | (27.6 | ) | 153.6 | ||||||||||||||
Depreciation and amortization expense | (24.4 | ) | (11.0 | ) | (2.2 | ) | (14.7 | ) | (52.3 | ) | ||||||||||
Three Months Ended June 30, 2012: | ||||||||||||||||||||
Net sales | $ | 1,394.4 | $ | 1,040.4 | $ | 149.9 | $ | — | $ | 2,584.7 | ||||||||||
Income (loss) from operations | 92.3 | 66.1 | 5.0 | (27.0 | ) | 136.4 | ||||||||||||||
Depreciation and amortization expense | (24.4 | ) | (11.0 | ) | (2.4 | ) | (15.4 | ) | (53.2 | ) | ||||||||||
Six Months Ended June 30, 2013: | ||||||||||||||||||||
Net sales | $ | 2,941.3 | $ | 1,929.4 | $ | 320.3 | $ | — | $ | 5,191.0 | ||||||||||
Income (loss) from operations | 197.3 | 114.7 | 14.9 | (53.2 | ) | 273.7 | ||||||||||||||
Depreciation and amortization expense | (48.8 | ) | (22.1 | ) | (4.5 | ) | (28.9 | ) | (104.3 | ) | ||||||||||
Six Months Ended June 30, 2012: | ||||||||||||||||||||
Net sales | $ | 2,757.2 | $ | 1,858.0 | $ | 288.7 | $ | — | $ | 4,903.9 | ||||||||||
Income (loss) from operations | 177.1 | 108.2 | 7.5 | (52.8 | ) | 240.0 | ||||||||||||||
Depreciation and amortization expense | (48.7 | ) | (22.0 | ) | (4.7 | ) | (30.3 | ) | (105.7 | ) |
12. | Supplemental Guarantor Information |
Condensed Consolidating Balance Sheet | |||||||||||||||||||||||||||
June 30, 2013 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 142.0 | $ | 11.2 | $ | 26.2 | $ | — | $ | (0.1 | ) | $ | 179.3 | ||||||||||||
Accounts receivable, net | — | — | 1,335.2 | 55.3 | — | — | 1,390.5 | ||||||||||||||||||||
Merchandise inventory | — | — | 376.2 | 2.3 | — | — | 378.5 | ||||||||||||||||||||
Miscellaneous receivables | — | 55.4 | 103.3 | 6.4 | — | — | 165.1 | ||||||||||||||||||||
Deferred income taxes | — | 8.5 | 3.7 | (0.1 | ) | — | — | 12.1 | |||||||||||||||||||
Prepaid expenses and other | — | 24.0 | 83.6 | 0.6 | — | — | 108.2 | ||||||||||||||||||||
Total current assets | — | 229.9 | 1,913.2 | 90.7 | — | (0.1 | ) | 2,233.7 | |||||||||||||||||||
Property and equipment, net | — | 69.4 | 61.1 | 2.2 | — | — | 132.7 | ||||||||||||||||||||
Goodwill | — | 749.4 | 1,428.5 | 29.5 | — | — | 2,207.4 | ||||||||||||||||||||
Other intangible assets, net | — | 343.9 | 1,052.5 | 7.3 | — | — | 1,403.7 | ||||||||||||||||||||
Deferred financing costs, net | — | 41.4 | — | — | — | — | 41.4 | ||||||||||||||||||||
Other assets | 5.2 | 1.5 | 0.1 | 0.6 | — | (5.8 | ) | 1.6 | |||||||||||||||||||
Investment from and advances to subsidiaries | 203.8 | 2,892.0 | — | — | — | (3,095.8 | ) | — | |||||||||||||||||||
Total assets | $ | 209.0 | $ | 4,327.5 | $ | 4,455.4 | $ | 130.3 | $ | — | $ | (3,101.7 | ) | $ | 6,020.5 | ||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||
Accounts payable—trade | $ | — | $ | 20.6 | $ | 725.2 | $ | 25.3 | $ | — | $ | (0.1 | ) | $ | 771.0 | ||||||||||||
Accounts payable—inventory financing | — | — | 282.5 | — | — | — | 282.5 | ||||||||||||||||||||
Current maturities of long-term debt | — | 13.5 | — | — | — | — | 13.5 | ||||||||||||||||||||
Deferred revenue | — | — | 96.5 | 0.4 | — | — | 96.9 | ||||||||||||||||||||
Accrued expenses | — | 136.4 | 138.9 | 6.0 | — | — | 281.3 | ||||||||||||||||||||
Total current liabilities | — | 170.5 | 1,243.1 | 31.7 | — | (0.1 | ) | 1,445.2 | |||||||||||||||||||
Long-term liabilities: | |||||||||||||||||||||||||||
Debt | — | 3,710.9 | — | — | — | — | 3,710.9 | ||||||||||||||||||||
Deferred income taxes | — | 189.8 | 412.1 | 1.6 | — | (5.2 | ) | 598.3 | |||||||||||||||||||
Accrued interest | — | 6.4 | — | — | — | — | 6.4 | ||||||||||||||||||||
Other liabilities | — | 46.1 | 3.6 | 1.6 | — | (0.6 | ) | 50.7 | |||||||||||||||||||
Total long-term liabilities | — | 3,953.2 | 415.7 | 3.2 | — | (5.8 | ) | 4,366.3 | |||||||||||||||||||
Total shareholders’ equity | 209.0 | 203.8 | 2,796.6 | 95.4 | — | (3,095.8 | ) | 209.0 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 209.0 | $ | 4,327.5 | $ | 4,455.4 | $ | 130.3 | $ | — | $ | (3,101.7 | ) | $ | 6,020.5 |
Condensed Consolidating Balance Sheet | |||||||||||||||||||||||||||
December 31, 2012 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 48.0 | $ | — | $ | 9.8 | $ | — | $ | (19.9 | ) | $ | 37.9 | ||||||||||||
Accounts receivable, net | — | — | 1,217.7 | 67.3 | — | — | 1,285.0 | ||||||||||||||||||||
Merchandise inventory | — | — | 313.2 | 1.4 | — | — | 314.6 | ||||||||||||||||||||
Miscellaneous receivables | — | 61.7 | 82.0 | 4.8 | — | — | 148.5 | ||||||||||||||||||||
Deferred income taxes | — | 8.7 | 5.5 | (0.1 | ) | — | — | 14.1 | |||||||||||||||||||
Prepaid expenses and other | — | 10.1 | 24.4 | 0.1 | — | — | 34.6 | ||||||||||||||||||||
Total current assets | — | 128.5 | 1,642.8 | 83.3 | — | (19.9 | ) | 1,834.7 | |||||||||||||||||||
Property and equipment, net | — | 73.9 | 66.2 | 2.6 | — | — | 142.7 | ||||||||||||||||||||
Goodwill | — | 749.4 | 1,428.5 | 31.4 | — | — | 2,209.3 | ||||||||||||||||||||
Other intangible assets, net | — | 348.6 | 1,121.7 | 8.2 | — | — | 1,478.5 | ||||||||||||||||||||
Deferred financing costs, net | — | 53.2 | — | — | — | — | 53.2 | ||||||||||||||||||||
Other assets | 5.4 | 1.1 | 0.4 | 0.6 | — | (5.9 | ) | 1.6 | |||||||||||||||||||
Investment in and advances to subsidiaries | 131.1 | 2,946.0 | — | — | — | (3,077.1 | ) | — | |||||||||||||||||||
Total assets | $ | 136.5 | $ | 4,300.7 | $ | 4,259.6 | $ | 126.1 | $ | — | $ | (3,102.9 | ) | $ | 5,720.0 | ||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||
Accounts payable—trade | $ | — | $ | 16.5 | $ | 500.3 | $ | 21.7 | $ | — | $ | (19.9 | ) | $ | 518.6 | ||||||||||||
Accounts payable—inventory financing | — | — | 249.2 | — | — | — | 249.2 | ||||||||||||||||||||
Current maturities of long-term debt | — | 40.0 | — | — | — | — | 40.0 | ||||||||||||||||||||
Deferred revenue | — | — | 57.8 | — | — | — | 57.8 | ||||||||||||||||||||
Accrued expenses | — | 139.3 | 157.4 | 5.9 | — | — | 302.6 | ||||||||||||||||||||
Total current liabilities | — | 195.8 | 964.7 | 27.6 | — | (19.9 | ) | 1,168.2 | |||||||||||||||||||
Long-term liabilities: | |||||||||||||||||||||||||||
Debt | — | 3,731.0 | — | — | — | — | 3,731.0 | ||||||||||||||||||||
Deferred income taxes | — | 188.1 | 440.0 | 1.7 | — | (5.5 | ) | 624.3 | |||||||||||||||||||
Accrued interest | — | 8.0 | — | — | — | — | 8.0 | ||||||||||||||||||||
Other liabilities | — | 46.7 | 4.0 | 1.7 | — | (0.4 | ) | 52.0 | |||||||||||||||||||
Total long-term liabilities | — | 3,973.8 | 444.0 | 3.4 | — | (5.9 | ) | 4,415.3 | |||||||||||||||||||
Total shareholders’ equity | 136.5 | 131.1 | 2,850.9 | 95.1 | — | (3,077.1 | ) | 136.5 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 136.5 | $ | 4,300.7 | $ | 4,259.6 | $ | 126.1 | $ | — | $ | (3,102.9 | ) | $ | 5,720.0 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 2,662.0 | $ | 117.3 | $ | — | $ | — | $ | 2,779.3 | |||||||||||||
Cost of sales | — | — | 2,225.4 | 102.3 | — | — | 2,327.7 | ||||||||||||||||||||
Gross profit | — | — | 436.6 | 15.0 | — | — | 451.6 | ||||||||||||||||||||
Selling and administrative expenses | — | 27.6 | 230.1 | 8.7 | — | — | 266.4 | ||||||||||||||||||||
Advertising expense | — | — | 30.6 | 1.0 | — | — | 31.6 | ||||||||||||||||||||
(Loss) income from operations | — | (27.6 | ) | 175.9 | 5.3 | — | — | 153.6 | |||||||||||||||||||
Interest (expense) income, net | — | (70.4 | ) | — | 0.1 | — | — | (70.3 | ) | ||||||||||||||||||
Net loss on extinguishments of long-term debt | — | (10.3 | ) | — | — | — | — | (10.3 | ) | ||||||||||||||||||
Management fee | — | 1.6 | — | (1.6 | ) | — | — | — | |||||||||||||||||||
Other (expense) income, net | — | (0.2 | ) | 0.3 | 0.1 | — | — | 0.2 | |||||||||||||||||||
(Loss) income before income taxes | — | (106.9 | ) | 176.2 | 3.9 | — | — | 73.2 | |||||||||||||||||||
Income tax benefit (expense) | — | 39.8 | (65.6 | ) | (0.7 | ) | — | — | (26.5 | ) | |||||||||||||||||
(Loss) income before equity in earnings of subsidiaries | — | (67.1 | ) | 110.6 | 3.2 | — | — | 46.7 | |||||||||||||||||||
Equity in earnings of subsidiaries | 46.7 | 113.8 | — | — | — | (160.5 | ) | — | |||||||||||||||||||
Net income | $ | 46.7 | $ | 46.7 | $ | 110.6 | $ | 3.2 | $ | — | $ | (160.5 | ) | $ | 46.7 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 2,471.9 | $ | 112.8 | $ | — | $ | — | $ | 2,584.7 | |||||||||||||
Cost of sales | — | — | 2,059.2 | 98.6 | — | — | 2,157.8 | ||||||||||||||||||||
Gross profit | — | — | 412.7 | 14.2 | — | — | 426.9 | ||||||||||||||||||||
Selling and administrative expenses | — | 27.0 | 224.1 | 8.4 | — | — | 259.5 | ||||||||||||||||||||
Advertising expense | — | — | 29.9 | 1.1 | — | — | 31.0 | ||||||||||||||||||||
(Loss) income from operations | — | (27.0 | ) | 158.7 | 4.7 | — | — | 136.4 | |||||||||||||||||||
Interest expense, net | — | (76.9 | ) | — | — | — | — | (76.9 | ) | ||||||||||||||||||
Net loss on extinguishments of long-term debt | — | — | — | — | — | — | — | ||||||||||||||||||||
Management fee | — | 0.8 | — | (0.8 | ) | — | — | — | |||||||||||||||||||
Other income, net | — | 0.2 | — | — | — | — | 0.2 | ||||||||||||||||||||
(Loss) income before income taxes | — | (102.9 | ) | 158.7 | 3.9 | — | — | 59.7 | |||||||||||||||||||
Income tax benefit (expense) | — | 41.0 | (62.9 | ) | (1.0 | ) | — | — | (22.9 | ) | |||||||||||||||||
(Loss) income before equity in earnings of subsidiaries | — | (61.9 | ) | 95.8 | 2.9 | — | — | 36.8 | |||||||||||||||||||
Equity in earnings of subsidiaries | 36.8 | 98.7 | — | — | — | (135.5 | ) | — | |||||||||||||||||||
Net income | $ | 36.8 | $ | 36.8 | $ | 95.8 | $ | 2.9 | $ | — | $ | (135.5 | ) | $ | 36.8 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 4,951.8 | $ | 239.2 | $ | — | $ | — | $ | 5,191.0 | |||||||||||||
Cost of sales | — | — | 4,127.5 | 209.9 | — | — | 4,337.4 | ||||||||||||||||||||
Gross profit | — | — | 824.3 | 29.3 | — | — | 853.6 | ||||||||||||||||||||
Selling and administrative expenses | — | 53.3 | 446.8 | 17.8 | — | — | 517.9 | ||||||||||||||||||||
Advertising expense | — | — | 60.2 | 1.8 | — | — | 62.0 | ||||||||||||||||||||
(Loss) income from operations | — | (53.3 | ) | 317.3 | 9.7 | — | — | 273.7 | |||||||||||||||||||
Interest (expense) income, net | — | (142.6 | ) | — | 0.2 | — | — | (142.4 | ) | ||||||||||||||||||
Net loss on extinguishments of long-term debt | — | (14.2 | ) | — | — | — | — | (14.2 | ) | ||||||||||||||||||
Management fee | — | 2.5 | — | (2.5 | ) | — | — | — | |||||||||||||||||||
Other (expense) income, net | — | (0.2 | ) | 0.6 | 0.2 | — | — | 0.6 | |||||||||||||||||||
(Loss) income before income taxes | — | (207.8 | ) | 317.9 | 7.6 | — | — | 117.7 | |||||||||||||||||||
Income tax benefit (expense) | — | 77.5 | (118.6 | ) | (1.6 | ) | — | — | (42.7 | ) | |||||||||||||||||
(Loss) income before equity in earnings of subsidiaries | — | (130.3 | ) | 199.3 | 6.0 | — | — | 75.0 | |||||||||||||||||||
Equity in earnings of subsidiaries | 75.0 | 205.3 | — | — | — | (280.3 | ) | — | |||||||||||||||||||
Net income | $ | 75.0 | $ | 75.0 | $ | 199.3 | $ | 6.0 | $ | — | $ | (280.3 | ) | $ | 75.0 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 4,684.9 | $ | 219.0 | $ | — | $ | — | $ | 4,903.9 | |||||||||||||
Cost of sales | — | — | 3,901.2 | 191.2 | — | — | 4,092.4 | ||||||||||||||||||||
Gross profit | — | — | 783.7 | 27.8 | — | — | 811.5 | ||||||||||||||||||||
Selling and administrative expenses | — | 52.8 | 441.3 | 17.0 | — | — | 511.1 | ||||||||||||||||||||
Advertising expense | — | — | 58.5 | 1.9 | — | — | 60.4 | ||||||||||||||||||||
(Loss) income from operations | — | (52.8 | ) | 283.9 | 8.9 | — | — | 240.0 | |||||||||||||||||||
Interest (expense) income, net | — | (156.1 | ) | 0.3 | — | — | — | (155.8 | ) | ||||||||||||||||||
Net loss on extinguishments of long-term debt | — | (9.4 | ) | — | — | — | — | (9.4 | ) | ||||||||||||||||||
Management fee | — | 2.2 | — | (2.2 | ) | — | — | — | |||||||||||||||||||
Other (expense) income, net | — | (0.1 | ) | 0.1 | — | — | — | — | |||||||||||||||||||
(Loss) income before income taxes | — | (216.2 | ) | 284.3 | 6.7 | — | — | 74.8 | |||||||||||||||||||
Income tax benefit (expense) | — | 89.8 | (115.1 | ) | (1.8 | ) | — | — | (27.1 | ) | |||||||||||||||||
(Loss) income before equity in earnings of subsidiaries | — | (126.4 | ) | 169.2 | 4.9 | — | — | 47.7 | |||||||||||||||||||
Equity in earnings of subsidiaries | 47.7 | 174.1 | — | — | — | (221.8 | ) | — | |||||||||||||||||||
Net income | $ | 47.7 | $ | 47.7 | $ | 169.2 | $ | 4.9 | $ | — | $ | (221.8 | ) | $ | 47.7 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Three Months Ended June 30, 2013 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income (loss) | $ | 43.4 | $ | 43.4 | $ | 110.6 | $ | (0.1 | ) | $ | — | $ | (153.9 | ) | $ | 43.4 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income | $ | 35.2 | $ | 35.2 | $ | 95.8 | $ | 1.3 | $ | — | $ | (132.3 | ) | $ | 35.2 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income | $ | 69.3 | $ | 69.3 | $ | 199.3 | $ | 0.3 | $ | — | $ | (268.9 | ) | $ | 69.3 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income | $ | 48.0 | $ | 48.0 | $ | 169.2 | $ | 5.2 | $ | — | $ | (222.4 | ) | $ | 48.0 |
Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||||||||||
Six Months Ended June 30, 2013 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | — | $ | (109.5 | ) | $ | 279.1 | $ | 17.7 | $ | — | $ | 19.8 | $ | 207.1 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||
Capital expenditures | — | (18.0 | ) | (2.0 | ) | — | — | — | (20.0 | ) | |||||||||||||||||
Net cash used in investing activities | — | (18.0 | ) | (2.0 | ) | — | — | — | (20.0 | ) | |||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||
Proceeds from borrowings under revolving credit facility | — | 63.0 | — | — | — | — | 63.0 | ||||||||||||||||||||
Repayments of borrowings under revolving credit facility | — | (63.0 | ) | — | — | — | — | (63.0 | ) | ||||||||||||||||||
Repayments of long-term debt | — | (43.4 | ) | — | — | — | — | (43.4 | ) | ||||||||||||||||||
Proceeds from issuance of long-term debt | — | 1,346.6 | — | — | — | — | 1,346.6 | ||||||||||||||||||||
Payments to extinguish long-term debt | — | (1,352.6 | ) | — | — | — | — | (1,352.6 | ) | ||||||||||||||||||
Net change in accounts payable-inventory financing | — | — | 33.3 | — | — | — | 33.3 | ||||||||||||||||||||
Payment of incentive compensation plan withholding taxes | — | (3.8 | ) | (19.5 | ) | — | — | — | (23.3 | ) | |||||||||||||||||
Advances from (to) affiliates | — | 279.6 | (279.7 | ) | 0.1 | — | — | — | |||||||||||||||||||
Other financing activities | — | (4.9 | ) | — | — | — | — | (4.9 | ) | ||||||||||||||||||
Net cash provided by (used in) financing activities | — | 221.5 | (265.9 | ) | 0.1 | — | — | (44.3 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | (1.4 | ) | — | — | (1.4 | ) | ||||||||||||||||||
Net increase in cash and cash equivalents | — | 94.0 | 11.2 | 16.4 | — | 19.8 | 141.4 | ||||||||||||||||||||
Cash and cash equivalents—beginning of period | — | 48.0 | — | 9.8 | — | (19.9 | ) | 37.9 | |||||||||||||||||||
Cash and cash equivalents—end of period | $ | — | $ | 142.0 | $ | 11.2 | $ | 26.2 | $ | — | $ | (0.1 | ) | $ | 179.3 |
Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||||||||||
Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | — | $ | (118.3 | ) | $ | 410.6 | $ | 13.1 | $ | — | $ | (0.7 | ) | $ | 304.7 | |||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||
Capital expenditures | — | (8.8 | ) | (6.5 | ) | (0.4 | ) | — | — | (15.7 | ) | ||||||||||||||||
Net cash used in investing activities | — | (8.8 | ) | (6.5 | ) | (0.4 | ) | — | — | (15.7 | ) | ||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||
Proceeds from borrowings under revolving credit facility | — | 256.0 | — | — | — | — | 256.0 | ||||||||||||||||||||
Repayments of borrowings under revolving credit facility | — | (256.0 | ) | — | — | — | — | (256.0 | ) | ||||||||||||||||||
Repayments of long-term debt | — | (201.0 | ) | — | — | — | — | (201.0 | ) | ||||||||||||||||||
Proceeds from issuance of long-term debt | — | 135.7 | — | — | — | — | 135.7 | ||||||||||||||||||||
Payments to extinguish long-term debt | — | (136.9 | ) | — | — | — | — | (136.9 | ) | ||||||||||||||||||
Net change in accounts payable-inventory financing | — | — | (25.5 | ) | — | — | — | (25.5 | ) | ||||||||||||||||||
Advances from (to) affiliates | — | 371.8 | (372.3 | ) | 0.5 | — | — | — | |||||||||||||||||||
Other financing activities | — | (2.4 | ) | — | — | — | — | (2.4 | ) | ||||||||||||||||||
Net cash provided by (used in) financing activities | — | 167.2 | (397.8 | ) | 0.5 | — | — | (230.1 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | (0.1 | ) | — | — | (0.1 | ) | ||||||||||||||||||
Net increase in cash and cash equivalents | — | 40.1 | 6.3 | 13.1 | — | (0.7 | ) | 58.8 | |||||||||||||||||||
Cash and cash equivalents—beginning of period | — | 102.1 | 15.8 | 8.1 | — | (26.1 | ) | 99.9 | |||||||||||||||||||
Cash and cash equivalents—end of period | $ | — | $ | 142.2 | $ | 22.1 | $ | 21.2 | $ | — | $ | (26.8 | ) | $ | 158.7 |
13. | Subsequent Events |
• | An important factor affecting our ability to generate sales and achieve our targeted operating results is the impact of general economic conditions on our customers’ willingness to spend on information technology. In the second quarter of 2012, we began to see customers take a more cautious approach to spending as increased macroeconomic uncertainty impacted decision-making and led to some customers delaying purchases. While we are beginning to see improvements in operating results, we will continue to closely monitor macroeconomic conditions for the remainder of 2013. Uncertainties related to the potential impacts of federal budget negotiations, potential changes in tax and regulatory policy, weakening consumer and business confidence or increased unemployment could result in reduced or deferred spending by our customers on information technology products and services and increased competitive pricing pressures. |
• | Our Public segment sales are impacted by government spending policies, budget priorities and revenue levels. An adverse change in any of these factors could cause our Public segment customers to reduce their purchases or to terminate or not renew contracts with us, which could adversely affect our business, results of operations or cash flows. Although our sales to the federal government are diversified across multiple agencies and departments, they collectively accounted for approximately 10%, 10% and 11% of our net sales for the years ended December 31, 2012, 2011 and 2010, respectively. |
• | We believe that our customers’ transition to more complex technology solutions will continue to be an important growth area for us in the future. However, because the market for technology products and services is highly competitive, our success at capitalizing on this transition will be based on our ability to tailor specific solutions to customer needs, the quality and breadth of our product and service offerings, the knowledge and expertise of our sales force, price, product availability and speed of delivery. |
• | Pre-tax charges of $36.7 million related to the acceleration of the expense recognition for certain equity awards and $4.0 million for the related employer payroll taxes. Such charges will be included in selling and administrative expenses in our consolidated statement of operations. See Note 7 of the accompanying unaudited interim consolidated financial statements for additional discussion of the impact of the IPO on our equity awards. |
• | A pre-tax charge of $24.4 million related to the payment of a termination fee to affiliates of Madison Dearborn Partners, LLC and Providence Equity Partners, L.L.C. in connection with the termination of the management services agreement with such entities, to be included in selling and administrative expenses in our consolidated statement of operations. See Note 13 of the accompanying unaudited interim consolidated financial statements for additional discussion of this transaction. |
• | A pre-tax charge of $16.7 million related to the July 2, 2013 redemption of $175.0 million aggregate principal amount of senior secured notes due 2018. This charge represents $14.0 million in redemption premium and $2.7 million for the write-off of a portion of the remaining deferred financing costs and will be included in loss on extinguishments of long-term debt in our consolidated statement of operations. See Note 13 of the accompanying unaudited interim consolidated financial statements for additional discussion of this redemption. |
• | A pre-tax charge of $24.7 million related to the August 1, 2013 redemption of $324.0 million aggregate principal amount of senior subordinated notes due 2017 using a portion of the net proceeds from the IPO and incremental borrowings under the senior secured term loan facility. This charge represents $20.3 million in redemption premium and $4.4 million for the write-off of a portion of the remaining deferred financing costs and will be included in loss on extinguishments of long-term debt in our consolidated statement of operations. See Note 13 of the accompanying unaudited interim consolidated financial statements for additional discussion of this redemption. |
• | A pre-tax charge of $7.5 million related to compensation expense in connection with the Restricted Debt Unit Plan following the redemption of the $324.0 million aggregate principal amount of senior subordinated notes due 2017 as discussed above. See Note 9 of the accompanying unaudited interim consolidated financial statements for additional discussion of this charge. |
(dollars in millions) | Three months ended June 30, | ||||||
2013 | 2012 | ||||||
Net sales | $ | 2,779.3 | $ | 2,584.7 | |||
Gross profit | 451.6 | 426.9 | |||||
Income from operations | 153.6 | 136.4 | |||||
Net income | 46.7 | 36.8 | |||||
Non-GAAP net income | 79.2 | 67.2 | |||||
Adjusted EBITDA | 212.6 | 200.6 | |||||
Average daily sales | 43.4 | 40.4 | |||||
Net debt (defined as total debt minus cash and cash equivalents) | 3,545.1 | 3,712.7 | |||||
Cash conversion cycle (in days) | 21 | 21 |
Three Months Ended June 30, 2013 | Three Months Ended June 30, 2012 | |||||||||||||
Dollars in Millions | Percentage of Net Sales | Dollars in Millions | Percentage of Net Sales | |||||||||||
Net sales | $ | 2,779.3 | 100.0 | % | $ | 2,584.7 | 100.0 | % | ||||||
Cost of sales | 2,327.7 | 83.8 | 2,157.8 | 83.5 | ||||||||||
Gross profit | 451.6 | 16.2 | 426.9 | 16.5 | ||||||||||
Selling and administrative expenses | 266.4 | 9.6 | 259.5 | 10.0 | ||||||||||
Advertising expense | 31.6 | 1.1 | 31.0 | 1.2 | ||||||||||
Income from operations | 153.6 | 5.5 | 136.4 | 5.3 | ||||||||||
Interest expense, net | (70.3 | ) | (2.5 | ) | (76.9 | ) | (3.0 | ) | ||||||
Net loss on extinguishments of long-term debt | (10.3 | ) | (0.4 | ) | — | — | ||||||||
Other income, net | 0.2 | — | 0.2 | — | ||||||||||
Income before income taxes | 73.2 | 2.6 | 59.7 | 2.3 | ||||||||||
Income tax expense | (26.5 | ) | (0.9 | ) | (22.9 | ) | (0.9 | ) | ||||||
Net income | $ | 46.7 | 1.7 | % | $ | 36.8 | 1.4 | % |
Three Months Ended June 30, | ||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||
(dollars in millions) | Net Sales | Percentage of Total Net Sales | Net Sales | Percentage of Total Net Sales | Dollar Change | Percent Change (1) | ||||||||||||||
Corporate | $ | 1,537.4 | 55.3 | % | $ | 1,394.4 | 53.9 | % | $ | 143.0 | 10.3 | % | ||||||||
Public | 1,082.6 | 39.0 | 1,040.4 | 40.3 | 42.2 | 4.1 | ||||||||||||||
Other | 159.3 | 5.7 | 149.9 | 5.8 | 9.4 | 6.2 | ||||||||||||||
Total net sales | $ | 2,779.3 | 100.0 | % | $ | 2,584.7 | 100.0 | % | $ | 194.6 | 7.5 | % |
(dollars in millions) | Three Months Ended June 30, | Dollar Change | Percent Change | ||||||||||||
2013 | 2012 | ||||||||||||||
Corporate: | |||||||||||||||
Medium / Large | $ | 1,271.4 | $ | 1,124.7 | $ | 146.7 | 13.0 | % | |||||||
Small Business | 266.0 | 269.7 | (3.7 | ) | (1.4 | ) | |||||||||
Total Corporate | $ | 1,537.4 | $ | 1,394.4 | $ | 143.0 | 10.3 | % | |||||||
Public: | |||||||||||||||
Government | $ | 295.7 | $ | 318.0 | $ | (22.3 | ) | (7.0 | )% | ||||||
Education | 420.6 | 349.5 | 71.1 | 20.4 | |||||||||||
Healthcare | 366.3 | 372.9 | (6.6 | ) | (1.8 | ) | |||||||||
Total Public | $ | 1,082.6 | $ | 1,040.4 | $ | 42.2 | 4.1 | % |
Three Months Ended June 30, 2013 | Three Months Ended June 30, 2012 | ||||||||||||||||
Dollars in Millions | Operating Margin Percentage | Dollars in Millions | Operating Margin Percentage | Percent Change in Income (loss) from Operations | |||||||||||||
Segments: (1) | |||||||||||||||||
Corporate | $ | 103.2 | 6.7 | % | $ | 92.3 | 6.6 | % | 11.7 | % | |||||||
Public | 69.1 | 6.4 | 66.1 | 6.4 | 4.6 | ||||||||||||
Other | 8.9 | 5.6 | 5.0 | 3.3 | 76.7 | ||||||||||||
Headquarters (2) | (27.6 | ) | nm* | (27.0 | ) | nm* | 2.2 | ||||||||||
Total income from operations | $ | 153.6 | 5.5 | % | $ | 136.4 | 5.3 | % | 12.6 | % |
(1) | Segment income from operations includes the segment’s direct operating income and allocations for Headquarters’ costs, allocations for logistics services, certain inventory adjustments, and volume rebates and cooperative advertising from vendors. |
(2) | Includes certain Headquarters’ function costs that are not allocated to the segments. |
(in millions) | Three Months Ended June 30, | |||||||
2013 | 2012 | |||||||
Net income | $ | 46.7 | $ | 36.8 | ||||
Amortization of intangibles (1) | 40.1 | 41.1 | ||||||
Non-cash equity-based compensation | 2.1 | 5.8 | ||||||
Net loss on extinguishments of long-term debt | 10.3 | — | ||||||
Interest expense adjustment related to extinguishments of long-term debt (2) | — | — | ||||||
IPO related expenses (3) | 0.2 | — | ||||||
Aggregate adjustment for income taxes (4) | (20.2 | ) | (16.5 | ) | ||||
Non-GAAP net income | $ | 79.2 | $ | 67.2 |
(1) | Includes amortization expense for acquisition-related intangible assets, primarily customer relationships and trade names. |
(2) | Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. |
(3) | Represents certain fees and costs expensed related to the IPO of the Company's shares. |
(4) | Based on a normalized effective tax rate of 39.0%. |
(in millions) | Three Months Ended June 30, | |||||||
2013 | 2012 | |||||||
Net income | $ | 46.7 | $ | 36.8 | ||||
Depreciation and amortization | 52.3 | 53.2 | ||||||
Income tax expense | 26.5 | 22.9 | ||||||
Interest expense, net | 70.3 | 76.9 | ||||||
EBITDA | 195.8 | 189.8 | ||||||
Adjustments: | ||||||||
Non-cash equity-based compensation | 2.1 | 5.8 | ||||||
Sponsor fee | 1.3 | 1.2 | ||||||
Consulting and debt-related professional fees | 0.3 | 0.4 | ||||||
Net loss on extinguishments of long-term debt | 10.3 | — | ||||||
Other adjustments (1) | 2.8 | 3.4 | ||||||
Total adjustments | 16.8 | 10.8 | ||||||
Adjusted EBITDA | $ | 212.6 | $ | 200.6 |
(1) | Other adjustments primarily include certain retention costs and equity investment income. |
Six Months Ended June 30, 2013 | Six Months Ended June 30, 2012 | |||||||||||||
Dollars in Millions | Percentage of Net Sales | Dollars in Millions | Percentage of Net Sales | |||||||||||
Net sales | $ | 5,191.0 | 100.0 | % | $ | 4,903.9 | 100.0 | % | ||||||
Cost of sales | 4,337.4 | 83.6 | 4,092.4 | 83.5 | ||||||||||
Gross profit | 853.6 | 16.4 | 811.5 | 16.5 | ||||||||||
Selling and administrative expenses | 517.9 | 9.9 | 511.1 | 10.4 | ||||||||||
Advertising expense | 62.0 | 1.2 | 60.4 | 1.2 | ||||||||||
Income from operations | 273.7 | 5.3 | 240.0 | 4.9 | ||||||||||
Interest expense, net | (142.4 | ) | (2.7 | ) | (155.8 | ) | (3.2 | ) | ||||||
Net loss on extinguishments of long-term debt | (14.2 | ) | (0.3 | ) | (9.4 | ) | (0.2 | ) | ||||||
Other income, net | 0.6 | — | — | — | ||||||||||
Income before income taxes | 117.7 | 2.3 | 74.8 | 1.5 | ||||||||||
Income tax expense | (42.7 | ) | (0.9 | ) | (27.1 | ) | (0.5 | ) | ||||||
Net income | $ | 75.0 | 1.4 | % | $ | 47.7 | 1.0 | % |
Six Months Ended June 30, | ||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||
(dollars in millions) | Net Sales | Percentage of Total Net Sales | Net Sales | Percentage of Total Net Sales | Dollar Change | Percent Change (1) | ||||||||||||||
Corporate | $ | 2,941.3 | 56.7 | % | $ | 2,757.2 | 56.2 | % | $ | 184.1 | 6.7 | % | ||||||||
Public | 1,929.4 | 37.2 | 1,858.0 | 37.9 | 71.4 | 3.8 | ||||||||||||||
Other | 320.3 | 6.1 | 288.7 | 5.9 | 31.6 | 10.9 | ||||||||||||||
Total net sales | $ | 5,191.0 | 100.0 | % | $ | 4,903.9 | 100.0 | % | $ | 287.1 | 5.9 | % |
(dollars in millions) | Six Months Ended June 30, | Dollar Change | Percent Change | ||||||||||||
2013 | 2012 | ||||||||||||||
Corporate: | |||||||||||||||
Medium / Large | $ | 2,417.6 | $ | 2,214.3 | $ | 203.3 | 9.2 | % | |||||||
Small Business | 523.7 | 542.9 | (19.2 | ) | (3.5 | ) | |||||||||
Total Corporate | $ | 2,941.3 | $ | 2,757.2 | $ | 184.1 | 6.7 | % | |||||||
Public: | |||||||||||||||
Government | $ | 548.0 | $ | 580.6 | $ | (32.6 | ) | (5.6 | )% | ||||||
Education | 652.9 | 571.2 | 81.7 | 14.3 | |||||||||||
Healthcare | 728.5 | 706.2 | 22.3 | 3.2 | |||||||||||
Total Public | $ | 1,929.4 | $ | 1,858.0 | $ | 71.4 | 3.8 | % |
Six Months Ended June 30, 2013 | Six Months Ended June 30, 2012 | ||||||||||||||||
Dollars in Millions | Operating Margin Percentage | Dollars in Millions | Operating Margin Percentage | Percent Change in Income (loss) from Operations | |||||||||||||
Segments: (1) | |||||||||||||||||
Corporate | $ | 197.3 | 6.7 | % | $ | 177.1 | 6.4 | % | 11.4 | % | |||||||
Public | 114.7 | 5.9 | 108.2 | 5.8 | 6.1 | ||||||||||||
Other | 14.9 | 4.7 | 7.5 | 2.6 | 98.8 | ||||||||||||
Headquarters (2) | (53.2 | ) | nm* | (52.8 | ) | nm* | (0.9 | ) | |||||||||
Total income from operations | $ | 273.7 | 5.3 | % | $ | 240.0 | 4.9 | % | 14.0 | % |
(1) | Segment income from operations includes the segment’s direct operating income and allocations for Headquarters’ costs, allocations for logistics services, certain inventory adjustments, and volume rebates and cooperative advertising from vendors. |
(2) | Includes certain Headquarters’ function costs that are not allocated to the segments. |
(in millions) | Six Months Ended June 30, | |||||||
2013 | 2012 | |||||||
Net income | $ | 75.0 | $ | 47.7 | ||||
Amortization of intangibles (1) | 80.5 | 82.2 | ||||||
Non-cash equity-based compensation | 4.0 | 11.5 | ||||||
Net loss on extinguishments of long-term debt | 14.2 | 9.4 | ||||||
Interest expense adjustment related to extinguishments of long-term debt (2) | (0.8 | ) | (1.7 | ) | ||||
IPO related expenses (3) | 0.2 | — | ||||||
Aggregate adjustment for income taxes (4) | (37.6 | ) | (36.0 | ) | ||||
Non-GAAP net income | $ | 135.5 | $ | 113.1 |
(1) | Includes amortization expense for acquisition-related intangible assets, primarily customer relationships and trade names. |
(2) | Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. |
(3) | Represents certain fees and costs expensed related to the IPO of the Company's shares. |
(4) | Based on a normalized effective tax rate of 39.0%. |
(in millions) | Six Months Ended June 30, | |||||||
2013 | 2012 | |||||||
Net income | $ | 75.0 | $ | 47.7 | ||||
Depreciation and amortization | 104.3 | 105.7 | ||||||
Income tax expense | 42.7 | 27.1 | ||||||
Interest expense, net | 142.4 | 155.8 | ||||||
EBITDA | 364.4 | 336.3 | ||||||
Adjustments: | ||||||||
Non-cash equity-based compensation | 4.0 | 11.5 | ||||||
Sponsor fee | 2.5 | 2.5 | ||||||
Consulting and debt-related professional fees | 0.4 | 0.5 | ||||||
Net loss on extinguishments of long-term debt | 14.2 | 9.4 | ||||||
Other adjustments (1) | 5.7 | 6.8 | ||||||
Total adjustments | 26.8 | 30.7 | ||||||
Adjusted EBITDA | $ | 391.2 | $ | 367.0 |
(1) | Other adjustments primarily include certain retention costs and equity investment income. |
Six Months Ended June 30, | ||||||||
(in millions) | 2013 | 2012 | ||||||
EBITDA | $ | 364.4 | $ | 336.3 | ||||
Depreciation and amortization | (104.3 | ) | (105.7 | ) | ||||
Income tax expense | (42.7 | ) | (27.1 | ) | ||||
Interest expense, net | (142.4 | ) | (155.8 | ) | ||||
Net income | 75.0 | 47.7 | ||||||
Depreciation and amortization | 104.3 | 105.7 | ||||||
Equity-based compensation expense | 4.0 | 11.5 | ||||||
Deferred income taxes | (23.5 | ) | (32.0 | ) | ||||
Allowance for doubtful accounts | — | — | ||||||
Amortization of deferred financing costs and debt premium | 5.3 | 8.0 | ||||||
Net loss on extinguishments of long-term debt | 14.2 | 9.4 | ||||||
Other | — | 0.9 | ||||||
Changes in assets and liabilities | 27.8 | 153.5 | ||||||
Net cash provided by operating activities | $ | 207.1 | $ | 304.7 |
(in millions) | Six Months Ended June 30, | ||||||
2013 | 2012 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 207.1 | $ | 304.7 | |||
Investing activities | (20.0 | ) | (15.7 | ) | |||
Net change in accounts payable-inventory financing | 33.3 | (25.5 | ) | ||||
Other cash flows from financing activities | (77.6 | ) | (204.6 | ) | |||
Financing activities | (44.3 | ) | (230.1 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (1.4 | ) | (0.1 | ) | |||
Net increase in cash and cash equivalents | $ | 141.4 | $ | 58.8 |
(in days) | June 30, | ||||
2013 | 2012 | ||||
Days of sales outstanding (DSO) (1) | 41 | 40 | |||
Days of supply in inventory (DIO) (2) | 15 | 14 | |||
Days of purchases outstanding (DPO) (3) | (35 | ) | (33 | ) | |
Cash conversion cycle | 21 | 21 |
(1) | Represents the rolling three month average of the balance of trade accounts receivable, net at the end of the period divided by average daily net sales for the same three-month period. Also incorporates components of other miscellaneous receivables. |
(2) | Represents the rolling three month average of the balance of inventory at the end of the period divided by average daily cost of sales for the same three-month period. |
(3) | Represents the rolling three month average of the combined balance of accounts payable-trade, excluding cash overdrafts, and accounts payable-inventory financing at the end of the period divided by average daily cost of sales for the same three-month period. |
(dollars in millions) | Interest Rate (1) | June 30, 2013 | December 31, 2012 | ||||||||
Senior secured asset-based revolving credit facility | — | % | $ | — | $ | — | |||||
Senior secured term loan facility | 3.5 | % | 1,346.6 | 1,339.5 | |||||||
Unamortized discount on senior secured term loan facility | (3.3 | ) | — | ||||||||
Senior secured notes due 2018 | 8.0 | % | 500.0 | 500.0 | |||||||
Senior notes due 2019 | 8.5 | % | 1,305.0 | 1,305.0 | |||||||
Unamortized premium on senior notes due 2019 | 4.6 | 5.0 | |||||||||
Senior subordinated notes due 2017 | 12.535 | % | 571.5 | 621.5 | |||||||
Senior notes due 2015 | — | % | — | — | |||||||
Total long-term debt | 3,724.4 | 3,771.0 | |||||||||
Less current maturities of long-term debt | (13.5 | ) | (40.0 | ) | |||||||
Long-term debt, excluding current maturities | $ | 3,710.9 | $ | 3,731.0 |
(in millions) | June 30, 2013 | December 31, 2012 | ||||||
Revolving Loan inventory financing agreement | $ | 280.5 | $ | 248.3 | ||||
Other inventory financing agreements | 2.0 | 0.9 | ||||||
Accounts payable-inventory financing | $ | 282.5 | $ | 249.2 |
• | the stockholder must have given timely notice in writing to our Corporate Secretary; |
• | the stockholder and any beneficial owner of shares held by the stockholder must have acted in accordance with certain representations set forth in a nomination solicitation statement required by our bylaws; and |
• | if the stockholder, or the beneficial owner on whose behalf any such nomination is made, has provided us with a stockholder notice (as described below), such stockholder or beneficial owner must have delivered a proxy statement and form of proxy to holders of a percentage of our voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder. |
• | as to each person that the stockholder proposes to nominate for election or reelection as a director, all information relating to such person as would be required to be disclosed in the solicitation of proxies or consents for the election of such nominees as directors pursuant to Regulation 14A under the Exchange Act and such person's written consent to serve as a director if elected, as well as any other information required by the SEC's proxy rules in a contested election; |
• | as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made; |
• | the name and address of such stockholder, as they appear on our books, and of such beneficial owner; |
• | the class or series and number of shares of our common stock that are owned beneficially and of record by such stockholder and such beneficial owner, including any derivative positions of the stockholder; |
• | information with respect to persons or entities affiliated with the stockholder and any arrangements between such stockholder or such beneficial owner and the nominee and any other person or entities pursuant to which the nomination is to be made by such stockholder; and |
• | whether either such stockholder or beneficial owner intends to deliver a proxy statement and/or form of proxy to holders of a sufficient number of holders of our voting shares reasonably believed by such stockholder or beneficial owner to elect such nominee or nominees (an affirmative statement of such intent). |
Exhibit | Description | |
3.1 | Fifth Amended and Restated Certificate of Incorporation of CDW Corporation, previously filed as Exhibit 3.1 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
3.2 | Amended and Restated By-Laws of CDW Corporation, previously filed as Exhibit 3.2 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.1 | Term Loan Agreement, dated as of April 29, 2013, by and among CDW LLC, the lenders from time to time party thereto, Barclays Bank PLC, as administrative agent and collateral agent, and the joint lead arrangers, joint bookrunners, co-syndication agents and co-documentation agents party thereto, previously filed as Exhibit 10.1 with CDW Corporation's Form 8-K filed on May 1, 2013 and incorporated herein by reference. | |
10.2 | First Amendment to Term Loan Agreement, dated as of May 30, 2013, by and among CDW LLC, the lenders from time to time party thereto, and Barclays Bank PLC, as administrative agent and collateral agent, previously filed as Exhibit 10.3 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.3 | Second Amended and Restated Guarantee and Collateral Agreement, dated April 29, 2013, by and among CDW LLC, the guarantors party thereto and Barclays Bank PLC, as collateral agent, previously filed as Exhibit 10.2 with CDW Corporation's Form 8-K filed on May 1, 2013 and incorporated herein by reference. | |
10.4 | Termination Agreement, dated as of June 12, 2013, by and among CDW Corporation, Madison Dearborn Partners V-B, L.P. and Providence Equity Partners L.L.C., previously filed as Exhibit 10.6 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.5 | Form of Indemnification Agreement by and between CDW Corporation and its directors and officers, previously filed as Exhibit 10.32 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.6 | Stockholders Agreement, dated as of June 10, 2013, by and among CDW Corporation, Madison Dearborn Capital Partners V-A, L.P., Madison Dearborn Capital Partners V-C, L.P., Madison Dearborn Capital Partners V Executive-A, L.P., Providence Equity Partners VI L.P., Providence Equity Partners VI-A L.P. and the other securityholders party thereto, previously filed as Exhibit 10.33 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.7 | CDW Corporation 2013 Senior Management Incentive Plan, previously filed as Exhibit 10.34 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.8 | CDW Corporation 2013 Long-Term Incentive Plan, previously filed as Exhibit 10.35 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.9 | CDW Corporation Coworker Stock Purchase Plan, previously filed as Exhibit 10.36 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.10 | Form of CDW Corporation Option Award Notice and Stock Option Agreement (to be executed by Thomas E. Richards), previously filed as Exhibit 10.37 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.11 | Form of CDW Corporation Option Award Notice and Stock Option Agreement (to be executed by Neal J. Campbell and Christina M. Corley), previously filed as Exhibit 10.38 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
10.12 | Form of CDW Corporation Restricted Stock Award Notice and Restricted Stock Award Agreement (executed by Thomas E. Richards, Dennis G. Berger, Douglas E. Eckrote, Christine A. Leahy, Jonathan J. Stevens and Ann E. Ziegler). | |
10.13 | Form of CDW Corporation Restricted Stock Award Notice and Restricted Stock Award Agreement (executed by Neal J. Campbell, Christina M. Corley, Christina V. Rother and Matthew A. Troka). | |
10.14 | CDW Amended and Restated Restricted Debt Unit Plan, previously filed as Exhibit 10.41 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934 | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934 | |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
CDW CORPORATION | |||||
Date: | August 12, 2013 | By: | /s/ Ann E. Ziegler | ||
Ann E. Ziegler | |||||
Senior Vice President and Chief Financial Officer | |||||
(Duly authorized officer and principal financial officer) |
Restricted Stock: | You have been awarded [____] restricted shares of Common Stock, par value $0.01 per share, subject to adjustment as provided in Section 8.2 of the Agreement. |
Grant Date: | [___________] |
Vesting Schedule: | Except as otherwise provided in the Plan, the Agreement or any other agreement between the Company or any of its Subsidiaries and Holder, and subject to the forfeiture condition in Section 1 of the Agreement, the Award shall vest daily on a pro rata basis commencing on the Grant Date and continuing through [____________] if, and only if, Holder is, and has been, continuously (except for any absence for vacation, leave, etc. in accordance with the Company's or its Subsidiaries' policies): (i) employed by the Company or any of its Subsidiaries, (ii) serving as a Non-Employee Director or (iii) providing services to the Company or any of its Subsidiaries as an advisor or consultant, in each case, from the date of this Agreement through and including such date. |
By: | ______________________________ |
1. | The name, address and social security number of the undersigned: |
2. | A description of the property with respect to which the election is being made: __________ shares of Common Stock, par value $0.01 per share, of CDW Corporation, a Delaware corporation, granted to the undersigned as restricted stock. |
3. | The date on which the property was transferred: ______ __, 20__. The taxable year for which such election is made: calendar 20__. |
4. | The restrictions to which the property is subject: If the employment of the undersigned terminates prior to specified dates, the undersigned will forfeit the property transferred to the undersigned. |
5. | The fair market value on _____________, 20__ of the property with respect to which the election is being made: $_____ per share. |
Dated: _______________, 20____ | [Name] |
Restricted Stock: | You have been awarded [____] restricted shares of Common Stock, par value $0.01 per share, subject to adjustment as provided in Section 8.2 of the Agreement. |
Grant Date: | [_____________] |
Vesting Schedule: | Except as otherwise provided in the Plan, the Agreement or any other agreement between the Company or any of its Subsidiaries and Holder, and subject to the forfeiture condition in Section 1 of the Agreement, the Award shall vest daily on a pro rata basis commencing on the Grant Date and continuing through [____________] if, and only if, Holder is, and has been, continuously (except for any absence for vacation, leave, etc. in accordance with the Company's or its Subsidiaries' policies): (i) employed by the Company or any of its Subsidiaries, (ii) serving as a Non-Employee Director or (iii) providing services to the Company or any of its Subsidiaries as an advisor or consultant, in each case, from the date of this Agreement through and including such date. |
By: | ______________________________ |
1. | The name, address and social security number of the undersigned: |
2. | A description of the property with respect to which the election is being made: __________ shares of Common Stock, par value $0.01 per share, of CDW Corporation, a Delaware corporation, granted to the undersigned as restricted stock. |
3. | The date on which the property was transferred: ______ __, 20__. The taxable year for which such election is made: calendar 20__. |
4. | The restrictions to which the property is subject: If the employment of the undersigned terminates prior to specified dates, the undersigned will forfeit the property transferred to the undersigned. |
5. | The fair market value on _____________, 20__ of the property with respect to which the election is being made: $_____ per share. |
6. | The amount paid for such property: $_____ per share. |
Dated: ________ __, 20__ | «Name» |
1. | I have reviewed this quarterly report on Form 10-Q of CDW Corporation (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Thomas E. Richards |
Thomas E. Richards |
Chairman and Chief Executive Officer |
CDW Corporation |
August 12, 2013 |
1. | I have reviewed this quarterly report on Form 10-Q of CDW Corporation (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Ann E. Ziegler |
Ann E. Ziegler |
Senior Vice President and Chief Financial Officer |
CDW Corporation |
August 12, 2013 |
/s/ Thomas E. Richards |
Thomas E. Richards |
Chairman and Chief Executive Officer |
CDW Corporation |
August 12, 2013 |
/s/ Ann E. Ziegler |
Ann E. Ziegler |
Senior Vice President and Chief Financial Officer |
CDW Corporation |
August 12, 2013 |
Commitments and Contingencies
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company is party to various legal proceedings that arise in the ordinary course of its business, which include commercial, intellectual property, employment, tort and other litigation matters. The Company is also subject to audit by federal, state and local authorities, by various partners and large customers, including government agencies, relating to purchases and sales under various contracts. In addition, the Company is subject to indemnification claims under various contracts. From time to time, certain customers of the Company file voluntary petitions for reorganization or liquidation under the U.S. bankruptcy laws. In such cases, certain pre-petition payments received by the Company could be considered preference items and subject to return to the bankruptcy administrator. As of June 30, 2013, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company's financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters. |
Consolidated Statements Of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Net sales | $ 2,779.3 | $ 2,584.7 | $ 5,191.0 | $ 4,903.9 |
Cost of sales | 2,327.7 | 2,157.8 | 4,337.4 | 4,092.4 |
Gross profit | 451.6 | 426.9 | 853.6 | 811.5 |
Selling and administrative expenses | 266.4 | 259.5 | 517.9 | 511.1 |
Advertising expense | 31.6 | 31.0 | 62.0 | 60.4 |
Income from operations | 153.6 | 136.4 | 273.7 | 240.0 |
Interest expense, net | (70.3) | (76.9) | (142.4) | (155.8) |
Net loss on extinguishments of long-term debt | (10.3) | 0 | (14.2) | (9.4) |
Other income (loss), net | 0.2 | 0.2 | 0.6 | 0 |
Income (loss) before income taxes | 73.2 | 59.7 | 117.7 | 74.8 |
Income tax (expense) benefit | (26.5) | (22.9) | (42.7) | (27.1) |
Net income (loss) | $ 46.7 | $ 36.8 | $ 75.0 | $ 47.7 |
Net Income per Common Share, Basic | $ 0.32 | $ 0.25 | $ 0.52 | $ 0.33 |
Net Income per Common Share, Diluted | $ 0.32 | $ 0.25 | $ 0.51 | $ 0.33 |
Weighted Average Number of Shares Outstanding, Basic | 145.3 | 145.1 | 145.2 | 145.0 |
Weighted Average Number of Shares Outstanding, Diluted | 146.7 | 145.8 | 146.5 | 145.8 |
Inventory Financing Agreements
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Inventory Financing Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Financing Agreements | Inventory Financing Agreements The Company has entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions, as described below. These amounts are classified separately as accounts payable-inventory financing on the accompanying consolidated balance sheets. The Company does not incur any interest expense associated with these agreements as balances are paid when they are due. The following table presents the amounts included in accounts payable-inventory financing:
The Company maintains a senior secured asset-based revolving credit facility as described in Note 4, which incorporates a $400.0 million floorplan sub-facility to facilitate the purchase of inventory from a certain vendor. In connection with the floorplan sub-facility, the Company maintains an inventory financing agreement on an unsecured basis with a financial intermediary to facilitate the purchase of inventory from this vendor (the “Revolving Loan inventory financing agreement”). Amounts outstanding under the Revolving Loan inventory financing agreement are unsecured and non-interest bearing. The Company also maintains other inventory financing agreements with financial intermediaries to facilitate the purchase of inventory from certain vendors. At June 30, 2013 and December 31, 2012, amounts owed under other inventory financing agreements of $2.0 million and $0.9 million, respectively, were collateralized by the inventory purchased under these financing agreements and a second lien on the related accounts receivable. |
Earnings per Share (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares [Table Text Block] | The following is a reconciliation of basic shares to diluted shares:
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Segment Information
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 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 private sector business customers, and Public, which is comprised of government agencies 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. Depreciation expense is included in Headquarters as it is not allocated among segments or used in measuring segment performance. The Company allocates resources to and evaluates performance of its segments based on net sales, income (loss) from operations and Adjusted EBITDA, a non-GAAP measure as defined in the Company's credit agreements. However, the Company has concluded that income (loss) from operations is the more useful measure in terms of discussion of operating results, as it is a GAAP measure. 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, 2013 and 2012:
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Subsequent Events (Details) (USD $)
|
1 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 0 Months Ended | ||||||||||||
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Jul. 31, 2013
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Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jul. 02, 2013
|
Sep. 30, 2013
Senior Secured Notes, due 2018 [Member]
|
Jul. 02, 2013
Senior Secured Notes, due 2018 [Member]
|
Jun. 30, 2013
Senior Secured Notes, due 2018 [Member]
|
Dec. 31, 2012
Senior Secured Notes, due 2018 [Member]
|
Jul. 31, 2013
Term Loan [Member]
|
Jun. 30, 2013
Term Loan [Member]
|
Dec. 31, 2012
Term Loan [Member]
|
Sep. 30, 2013
Senior Subordinated Notes [Member]
|
Aug. 01, 2013
Senior Subordinated Notes [Member]
|
Mar. 10, 2010
Senior Subordinated Notes [Member]
|
Jul. 31, 2013
IPO Over-Allotment [Member]
|
Jul. 02, 2013
IPO [Member]
|
Aug. 01, 2013
IPO Proceeds [Member]
Senior Subordinated Notes [Member]
|
Aug. 01, 2013
Term Loan Incremental Borrowings [Member]
Senior Subordinated Notes [Member]
|
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Subsequent Event [Line Items] | ||||||||||||||||||||
Stock Issued During Period, Shares, New Issues | 3,487,500 | 23,250,000 | ||||||||||||||||||
Sale of Stock, Price Per Share | $ 17.00 | $ 17.00 | ||||||||||||||||||
Proceeds from Issuance Initial Public Offering | $ 429,500,000 | |||||||||||||||||||
Net Proceeds Used For Termination Of Agreement | 24,400,000 | |||||||||||||||||||
Debt Instrument, Repurchased Face Amount | 175,000,000 | 324,000,000 | 28,500,000 | 146,000,000 | 178,000,000 | |||||||||||||||
Debt Instrument, Increase, Additional Borrowings | 190,000,000 | |||||||||||||||||||
Debt, short-term and long-term | 325,000,000 | 500,000,000 | 500,000,000 | 1,346,600,000 | 1,339,500,000 | 247,500,000 | ||||||||||||||
Net loss on extinguishments of long-term debt | 10,300,000 | 0 | 14,200,000 | 9,400,000 | 16,700,000 | 24,700,000 | ||||||||||||||
Redemption Premium, percentage of par value | 108.00% | 106.268% | ||||||||||||||||||
Extinguishment of Debt, Accrued Interest Paid to Lenders | 700,000 | 12,000,000 | ||||||||||||||||||
Extinguishment of Debt, Fees Paid to Lenders | 14,000,000 | 20,300,000 | ||||||||||||||||||
Write off of unamortized deferred financing costs | 2,700,000 | 4,400,000 | ||||||||||||||||||
Litigation Settlement, Net Of Expense | 10,500,000 | |||||||||||||||||||
Proceeds from Legal Settlements | $ 8,500,000 |
Income Taxes (Details)
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3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Income Tax Disclosure [Abstract] | ||||
Effective Income Tax Rate | 36.20% | 38.40% | 36.30% | 36.20% |
Description Of Business And Summary Of Significant Accounting Policies Stock Split (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Stock Split [Abstract] | ||
Common shares, par value | $ 0.01 | $ 0.01 |
Supplemental Guarantor Information (Tables)
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Jun. 30, 2013
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Supplemental Guarantor Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Balance Sheets |
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Consolidating Statements of Operations |
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Condensed Consolidating Statements of Comprehensive Income (Loss) |
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Condensed Consolidating Statements Cash Flows |
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Long-Term Debt -Senior Notes due 2015 (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | 6 Months Ended | 1 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
Senior PIK Exchange Notes due 2015 [Member]
|
Jun. 30, 2013
Senior PIK Interest Exchange Notes due 2015 [Member]
|
Jun. 30, 2013
Senior Exchange Notes due 2015 [Member]
|
Jun. 30, 2012
Senior Notes, due 2015 [Member]
|
Jun. 30, 2013
Senior Notes, due 2015 [Member]
|
Dec. 31, 2012
Senior Notes, due 2015 [Member]
|
Feb. 17, 2012
Senior Notes, due 2015 [Member]
|
Dec. 31, 2011
Senior Notes, due 2015 [Member]
|
Feb. 29, 2012
2019 Senior Notes, due 2019 [Member]
|
Jun. 30, 2013
2019 Senior Notes, due 2019 [Member]
|
Dec. 31, 2012
2019 Senior Notes, due 2019 [Member]
|
|
Debt Instrument [Line Items] | |||||||||||||||
Long-term Debt, stated interest rate | 11.50% | 12.25% | 11.00% | 8.50% | |||||||||||
Debt, short-term and long-term | $ 0 | $ 0 | $ 129.0 | $ 1,305.0 | $ 1,305.0 | ||||||||||
Proceeds from Issuance of long-term Debt | 1,346.6 | 135.7 | 130.0 | ||||||||||||
Net loss on extinguishments of long-term debt | 10.3 | 0 | 14.2 | 9.4 | 9.4 | ||||||||||
Write off of unamortized deferred financing costs | 1.5 | ||||||||||||||
Extinguishment of Debt, Fees Paid to Lenders | $ 7.9 |
Long-Term Debt -Term Loan (Details) (USD $)
|
3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 6 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Apr. 30, 2013
Term Loan [Member]
|
Jun. 30, 2013
Term Loan [Member]
|
Apr. 29, 2013
Term Loan [Member]
|
Dec. 31, 2012
Term Loan [Member]
|
Jan. 31, 2013
Prior Term Loan Facility [Member]
|
Jun. 30, 2013
Prior Term Loan Facility [Member]
|
Mar. 31, 2013
Prior Term Loan Facility [Member]
|
Jun. 30, 2013
Greater than 5.5 [Member]
Term Loan [Member]
|
Jun. 30, 2013
Less than or equal to 5.5 but greater than 4.5 [Member]
Term Loan [Member]
|
Jun. 30, 2013
Less than or equal to 4.5 [Member]
Term Loan [Member]
|
Jun. 30, 2013
Maximum, less than or equal to 5.5 [Member]
Term Loan [Member]
|
Jun. 30, 2013
Minimum, greater than 4.5 [Member]
Term Loan [Member]
|
Jun. 30, 2013
Maximum, less than or equal to 4.5 [Member]
Term Loan [Member]
|
Jun. 30, 2013
LIBOR [Member]
Minimum [Member]
Term Loan [Member]
|
Jun. 30, 2013
LIBOR [Member]
Maximum [Member]
Term Loan [Member]
|
Jun. 30, 2013
ABR [Member]
Minimum [Member]
Term Loan [Member]
|
Jun. 30, 2013
ABR [Member]
Maximum [Member]
Term Loan [Member]
|
Jun. 30, 2013
Accounts Payable, Inventory Financing [Member]
|
|
Debt Instrument [Line Items] | ||||||||||||||||||||||
Floorplan sub-facility, reserve | $ 8,800,000 | |||||||||||||||||||||
Proceeds from Issuance of long-term Debt | 1,346,600,000 | 135,700,000 | 1,350,000,000 | |||||||||||||||||||
Debt, short-term and long-term | 1,346,600,000 | 1,339,500,000 | 1,299,500,000 | |||||||||||||||||||
Mandatory prepayments as percentage of excess cash flow | 50.00% | 25.00% | 0.00% | |||||||||||||||||||
Net leverage ratio | 4.5 | 4.9 | 5.5 | 4.5 | 4.5 | |||||||||||||||||
Debt Instrument, Periodic Payment, Principal | 3,375,000 | |||||||||||||||||||||
Term Loan Repayments | 40,000,000 | |||||||||||||||||||||
Debt Instrument, Unamortized Discount | (3,300,000) | 3,400,000 | 0 | |||||||||||||||||||
Net loss on extinguishments of long-term debt | $ (10,300,000) | $ 0 | $ (14,200,000) | $ (9,400,000) | $ (10,300,000) | |||||||||||||||||
Discount, percent of par | 99.75% | |||||||||||||||||||||
Reference Interest Rate Floor | 1.00% | |||||||||||||||||||||
Variable Interest Rate Margin | 2.25% | 2.50% | 1250000.00% | 1500000.00% |
Segment Information (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Segment Information [Line Items] | ||||
Number of Reportable Segments | 2 | |||
Number of operating segments which do not meet reportable unit quantitative threshold | 2 | |||
Net sales | $ 2,779.3 | $ 2,584.7 | $ 5,191.0 | $ 4,903.9 |
Income (loss) from operations | 153.6 | 136.4 | 273.7 | 240.0 |
Depreciation and amortization expense | (52.3) | (53.2) | (104.3) | (105.7) |
Corporate [Member]
|
||||
Segment Information [Line Items] | ||||
Net sales | 1,537.4 | 1,394.4 | 2,941.3 | 2,757.2 |
Income (loss) from operations | 103.2 | 92.3 | 197.3 | 177.1 |
Depreciation and amortization expense | (24.4) | (24.4) | (48.8) | (48.7) |
Public [Member]
|
||||
Segment Information [Line Items] | ||||
Net sales | 1,082.6 | 1,040.4 | 1,929.4 | 1,858.0 |
Income (loss) from operations | 69.1 | 66.1 | 114.7 | 108.2 |
Depreciation and amortization expense | (11.0) | (11.0) | (22.1) | (22.0) |
Other [Member]
|
||||
Segment Information [Line Items] | ||||
Net sales | 159.3 | 149.9 | 320.3 | 288.7 |
Income (loss) from operations | 8.9 | 5.0 | 14.9 | 7.5 |
Depreciation and amortization expense | (2.2) | (2.4) | (4.5) | (4.7) |
Headquarters [Member]
|
||||
Segment Information [Line Items] | ||||
Net sales | 0 | 0 | 0 | 0 |
Income (loss) from operations | (27.6) | (27.0) | (53.2) | (52.8) |
Depreciation and amortization expense | $ (14.7) | $ (15.4) | $ (28.9) | $ (30.3) |
Segment Information (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | The following table presents information about the Company’s segments for the three and six months ended June 30, 2013 and 2012:
|
Consolidated Statement Of Shareholders' Equity (Deficit) (USD $)
In Millions, unless otherwise specified |
Total
|
Common Shares [Member]
|
Preferred Stock [Member]
|
Paid-In Capital [Member]
|
Accumulated Deficit [Member]
|
Accumulated Other Comprehensive Income (Loss) [Member]
|
---|---|---|---|---|---|---|
Balance at Dec. 31, 2012 | $ 136.5 | $ 1.4 | $ 0 | $ 2,207.7 | $ (2,073.0) | $ 0.4 |
Shareholders' Equity (Deficit) [Roll Forward] | ||||||
Equity-based compensation expense | 4.0 | 0 | 0 | 4.0 | 0 | 0 |
Treasury Stock, Value, Acquired, Cost Method | (0.1) | 0 | 0 | 0 | (0.1) | 0 |
Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax | (0.6) | 0 | 0 | (0.6) | 0 | 0 |
MPK Coworker Incentive Plan II units withheld for taxes | (0.1) | 0 | 0 | (0.1) | 0 | 0 |
Net income (loss) | 75.0 | 0 | 0 | 0 | 75.0 | 0 |
Foreign currency translation adjustment | (5.7) | 0 | 0 | 0 | 0 | (5.7) |
Balance at Jun. 30, 2013 | $ 209.0 | $ 1.4 | $ 0 | $ 2,211.0 | $ (1,998.1) | $ (5.3) |
Description Of Business And Summary Of Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Description of Business and Summary of Significant Accounting Policies [Abstract] | |
Description Of Business And Summary Of Significant Accounting Policies | Description of Business and Summary of Significant Accounting Policies Description of Business CDW is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions to small, medium and large business, government, education and healthcare customers in the U.S. and Canada. The Company's offerings range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. Basis of Presentation The accompanying unaudited interim consolidated financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 ("consolidated financial statements") have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 ("December 31, 2012 financial statements"). The significant accounting policies used in preparing these consolidated financial statements were applied on a basis consistent with those reflected in the December 31, 2012 financial statements, except as disclosed in Note 2. In the opinion of management, the consolidated financial statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, comprehensive income, cash flows and changes in shareholders' equity as of the dates and for the periods indicated. The unaudited consolidated statements of operations for such interim periods reported are not necessarily indicative of results for the full year. CDW Corporation ("Parent") was previously owned directly by CDW Holdings LLC ("CDW Holdings"), a company controlled by investment funds affiliated with Madison Dearborn Partners, LLC ("Madison Dearborn") and Providence Equity Partners, L.L.C. ("Providence Equity," and together with Madison Dearborn, the "Sponsors"), certain other co-investors and certain members of CDW management. On July 2, 2013, Parent completed an initial public offering ("IPO") of its common stock. During June 2013, in connection with the IPO, CDW Holdings distributed all of its shares of Parent's common stock to its members in accordance with their respective membership interests. See Note 13 for additional discussion of Parent's IPO. Parent has two 100% owned subsidiaries, CDW LLC and CDW Finance Corporation. CDW LLC is an Illinois limited liability company that, together with its 100% owned subsidiaries, holds all material assets and conducts all business activities and operations of the Company. CDW Finance Corporation is a Delaware corporation formed for the sole purpose of acting as co-issuer of certain debt obligations as described in Note 12 and does not hold any material assets or engage in any business activities or operations. Throughout these notes, the terms the “Company” and “CDW” refer to Parent and its 100% owned subsidiaries. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Parent and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. The notes to the consolidated financial statements contained in the December 31, 2012 financial statements include an additional discussion of the significant accounting policies and estimates used in the preparation of the Company's consolidated financial statements. There have been no material changes to the Company's significant accounting policies and estimates during the six months ended June 30, 2013. Reclassifications Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation. See Note 6 for a description of the reclassification and split of the Company's common shares that were completed during the second quarter of 2013. |
Long-Term Debt
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt Long-term debt was as follows:
(1)Weighted-average interest rate at June 30, 2013. At June 30, 2013, the Company was in compliance with the covenants under its various credit agreements as described below. Senior Secured Asset-Based Revolving Credit Facility (“Revolving Loan”) At June 30, 2013, the Company had no outstanding borrowings under the Revolving Loan, $1.2 million of undrawn letters of credit and $267.4 million reserved related to the floorplan sub-facility. The Revolving Loan matures on June 24, 2016. In connection with the floorplan sub-facility, the Company maintains a Revolving Loan inventory financing agreement with a financial intermediary. At June 30, 2013, the financial intermediary reported an outstanding balance of $258.6 million under the Revolving Loan inventory financing agreement. The total amount reported on the Company's consolidated balance sheet as accounts payable-inventory financing related to the Revolving Loan inventory financing agreement is $21.9 million more than the $258.6 million owed to the financial intermediary due to differences in the timing of reporting activity under the Revolving Loan inventory financing agreement. The outstanding balance reported by the financial intermediary excludes $8.8 million in reserves for open orders that reduce the availability under the Revolving Loan. Availability under the Revolving Loan is limited to (a) the lesser of the revolving commitment of $900.0 million and the amount of the borrowing base less (b) outstanding borrowings, letters of credit, and amounts outstanding under the Revolving Loan inventory financing agreement plus a reserve of 15% of open orders. At June 30, 2013, the borrowing base was $1,098.8 million based on the amount of eligible inventory and accounts receivable balances as of May 31, 2013. The Company could have borrowed up to an additional $631.4 million under the Revolving Loan at June 30, 2013. Senior Secured Term Loan Facility On April 29, 2013, the Company entered into a new seven-year, $1,350.0 million aggregate principal amount senior secured term loan facility (the "Term Loan"). Substantially all of the proceeds from the Term Loan were used to repay the $1,299.5 million outstanding aggregate principal amount of the prior senior secured term loan facility (the "Prior Term Loan Facility"). In connection with this refinancing, the Company recorded a loss on extinguishment of long-term debt of $10.3 million in the consolidated statement of operations for the three and six months ended June 30, 2013. This loss represented a write-off of the remaining unamortized deferred financing costs related to the Prior Term Loan Facility. The Term Loan was issued at a price of 99.75% of par, which resulted in a discount of $3.4 million. This discount is reported on the consolidated balance sheet as a reduction to the face amount of the Term Loan and is being amortized over the term of the related debt. Borrowings under the Term Loan bear interest at either (a) the alternate base rate ("ABR") plus a margin or (b) LIBOR plus a margin; provided that for the purposes of the Term Loan, LIBOR shall not be less than 1.00% per annum at any time. The margin is based upon a net leverage ratio as defined in the agreement governing the Term Loan, ranging from 1.25%-1.50% for ABR borrowings and 2.25%- 2.50% for LIBOR borrowings. Unlike the Prior Term Loan Facility, the Term Loan does not include a senior secured leverage ratio requirement or a hedging requirement. Additionally, the definition of debt under the Term Loan was revised to exclude amounts outstanding under the Company's inventory financing agreements. The Term Loan is subject to certain requirements as was the Prior Term Loan Facility to make mandatory annual excess cash flow prepayments under designated circumstances, including (i) a prepayment in an amount equal to 50% of the Company's excess cash flow for a fiscal year (the percentage rate of which decreases to 25% when the total net leverage ratio, as defined in the governing agreement, is less than or equal to 5.5 but greater than 4.5; and decreases to 0% when the total net leverage ratio is less than or equal to 4.5), and (ii) the net cash proceeds from the incurrence of certain additional indebtedness by the Company or its subsidiaries. The total net leverage ratio was 4.5 and 4.9 at June 30, 2013 and December 31, 2012, respectively. The total net leverage ratio at December 31, 2012 has been revised to conform to the definition in the agreement governing the Term Loan. The Company is required to pay quarterly principal installments equal to $3.375 million, with the remaining principal amount payable on the maturity date of April 29, 2020. The quarterly principal installment payments commenced during the quarter ended June 30, 2013. At June 30, 2013, the outstanding principal amount of the Term Loan was $1,346.6 million, excluding $3.3 million in unamortized discount. The Company has ten interest rate cap agreements in effect through January 14, 2015 with a combined notional amount of $1,150.0 million. These cap agreements have not been designated as cash flow hedges of interest rate risk for GAAP accounting purposes. Of the total $1,150.0 million notional amount, $500.0 million entitle the Company to payments from the counterparty of the amount, if any, by which three-month LIBOR exceeds 3.5% during the agreement period. The remaining cap agreements with a notional amount of $650.0 million entitle the Company to payments from the counterparty of the amount, if any, by which the three-month LIBOR exceeds 1.5% during the agreement period. The fair value of the Company's interest rate cap agreements was $0.2 million at June 30, 2013 and $0.1 million at December 31, 2012. On January 30, 2013, the Company made an optional prepayment of $40.0 million aggregate principal amount outstanding under the Prior Term Loan Facility. The optional prepayment satisfied the excess cash flow payment provision of the Prior Term Loan Facility with respect to the year ended December 31, 2012. See Note 13 for a description of the incremental borrowings under the Term Loan completed during the third quarter of 2013. 8.0% Senior Secured Notes due 2018 (“Senior Secured Notes”) The Senior Secured Notes were issued on December 17, 2010 and mature on December 15, 2018. At June 30, 2013, the outstanding principal amount of the Senior Secured Notes was $500.0 million. See Note 13 for a description of the partial redemption of Senior Secured Notes completed during the third quarter of 2013. 11.0% Senior Exchange Notes due 2015 (“Senior Exchange Notes”); 11.5% / 12.25% Senior PIK Election Exchange Notes due 2015 (“PIK Election Notes” together with the Senior Exchange Notes, the “Senior Notes due 2015”) At June 30, 2013 and December 31, 2012, there were no outstanding Senior Notes due 2015. In February and March 2012, the Company purchased or redeemed the remaining $129.0 million aggregate principal amount of Senior Notes due 2015, funded with the issuance of $130.0 million aggregate principal amount of additional Senior Notes (as defined below). In connection with these transactions, the Company recorded a loss on extinguishment of long-term debt of $9.4 million in the Company's consolidated statement of operations for the six months ended June 30, 2012. This loss represented $7.9 million in tender and redemption premiums and $1.5 million for the write-off of the remaining unamortized deferred financing costs related to the Senior Notes due 2015. 8.5% Senior Notes due 2019 (“Senior Notes”) On February 17, 2012, the Company issued $130.0 million aggregate principal amount of additional Senior Notes at an issue price of 104.375% of par. The $5.7 million premium received is reported on the consolidated balance sheets as an addition to the face amount of the Senior Notes and is being amortized as a reduction to interest expense over the term of the related debt. At June 30, 2013, the outstanding principal amount of Senior Notes was $1,305.0 million, excluding $4.6 million in unamortized premium. The Senior Notes mature on April 1, 2019. 12.535% Senior Subordinated Exchange Notes due 2017 (“Senior Subordinated Notes”) At June 30, 2013, the outstanding principal amount of the Company's Senior Subordinated Notes was $571.5 million. The Senior Subordinated Notes mature on October 12, 2017. On March 8, 2013, the Company redeemed $50.0 million aggregate principal amount of Senior Subordinated Notes at a redemption price that was 106.268% of the principal amount redeemed. Cash on hand was used to fund the redemption of $50.0 million aggregate principal amount, $3.1 million of redemption premium and $2.5 million in accrued and unpaid interest. In connection with this redemption, the Company recorded a loss on extinguishment of long-term debt of $3.9 million in the Company's consolidated statement of operations for the six months ended June 30, 2013. This loss represented $3.1 million in redemption premium and $0.8 million for the write-off of a portion of the unamortized deferred financing costs related to the Senior Subordinated Notes. See Note 13 for a description of the partial redemption of Senior Subordinated Notes completed during the third quarter of 2013. Fair Value The fair value of the Company's long-term debt instruments at June 30, 2013 was $3,899.9 million. The fair value of the Senior Secured Notes, Senior Notes and Senior Subordinated Notes is estimated using quoted market prices for identical assets or liabilities that are traded in over-the-counter secondary markets that are not considered active. The fair value of the Term Loan is estimated using dealer quotes for identical assets or liabilities in markets that are not considered active. Consequently, the Company's long-term debt is classified as Level 2 within the fair value hierarchy. At June 30, 2013, the carrying value of the Company's long-term debt was $3,723.1 million, excluding $4.6 million in unamortized premium and $3.3 million in unamortized discount. |
Recent Accounting Pronouncements
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Disclosure of the Effects of Reclassifications from Accumulated Other Comprehensive Income In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, which required that the effects of significant reclassifications from accumulated other comprehensive income to net income be shown parenthetically on the face of the consolidated financial statements or disclosed in a note. The adoption of this new guidance on January 1, 2013 did not have an impact on the Company's consolidated financial position, results of operations or cash flows. |
Earnings per Share (Details)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Earnings Per Share [Abstract] | ||||
Weighted Average Number of Shares Outstanding, Basic | 145.3 | 145.1 | 145.2 | 145.0 |
Weighted Average Number Diluted Shares Outstanding Adjustment | 1.4 | 0.7 | 1.3 | 0.8 |
Weighted Average Number of Shares Outstanding, Diluted | 146.7 | 145.8 | 146.5 | 145.8 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0 | 0 | 0 | 0 |
Inventory Financing Agreements (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Inventory Financing Agreements [Line Items] | ||
Accounts payable-inventory financing | $ 282,500,000 | $ 249,200,000 |
Accounts Payable, Inventory Financing [Member]
|
||
Inventory Financing Agreements [Line Items] | ||
Revolving Loan inventory financing agreement | 280,500,000 | 248,300,000 |
Other inventory financing agreements | 2,000,000 | 900,000 |
Accounts payable-inventory financing | 282,500,000 | 249,200,000 |
Floorplan sub-facility | 400,000,000 | |
Other inventory financing agreements, current | $ 2,000,000 | $ 900,000 |
Long-Term Debt -Interest Rate Caps (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
Dec. 31, 2011
|
---|---|---|---|
Derivative [Line Items] | |||
Interest Rate Cap, fair value | $ 0.2 | $ 0.1 | |
Cap agreement effective January 14, 2013-2015 [Member]
|
|||
Derivative [Line Items] | |||
Interest Rate Cap, number of agreements | 10 | ||
Interest Rate Cap, notional amount | 1,150.0 | ||
Interest Rate Cap Purchased During 2011 [Member]
|
|||
Derivative [Line Items] | |||
Notional Amount of Interest Rate Derivative Instruments Not Designated as Hedging Instruments | 500.0 | ||
Interest Rate Cap, cap rate | 3.50% | ||
Interest Rate Cap Purchased During 2012 [Member]
|
|||
Derivative [Line Items] | |||
Notional Amount of Interest Rate Derivative Instruments Not Designated as Hedging Instruments | 650.0 | ||
Interest Rate Cap, cap rate | 1.50% | ||
Senior Notes, due 2015 [Member]
|
|||
Derivative [Line Items] | |||
Debt, short-term and long-term | $ 0 | $ 0 | $ 129.0 |
Long-Term Debt -Fair Value of Long-Term Debt (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
Feb. 17, 2012
|
---|---|---|---|
2019 Senior Notes, due 2019 [Member]
|
|||
Fair Value [Line Items] | |||
Debt, short-term and long-term | $ 1,305.0 | $ 1,305.0 | |
Premium, unamortized | 4.6 | 5.0 | 5.7 |
Carrying (Reported) Amount, Fair Value Disclosure [Member]
|
|||
Fair Value [Line Items] | |||
Debt, short-term and long-term | 3,723.1 | ||
Fair Value, Inputs, Level 2 [Member]
|
|||
Fair Value [Line Items] | |||
Long-term Debt, fair value disclosures | $ 3,899.9 |
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