Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 28, 2010

 

 

CDW CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   333-169258   26-0273989

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

200 N. Milwaukee Avenue

Vernon Hills, Illinois

  60061
(Address of principal executive offices)   (Zip Code)

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

None

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 2.02. Results of Operations and Financial Condition

CDW Corporation (the “Company”) is furnishing under cover of this Form 8-K certain financial data related to the Company’s financial results for the quarter ended September 30, 2010. This financial data is attached to this report as Exhibit 99 and incorporated herein by reference. The Company is furnishing this information in connection with its previously announced webcast conference call to be held on Friday, October 29, 2010 at 10:30 a.m. ET / 9:30 a.m. CT to discuss these results.

The information in this Form 8-K (including Exhibit 99) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.

 

Description

99   Financial Data for the Quarter Ended September 30, 2010


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  CDW CORPORATION

Date:     October 28, 2010        

  By:  

  /s/ Ann E. Ziegler

      Ann E. Ziegler
      Senior Vice President and Chief Financial Officer
Financial Data for the Quarter Ended September 30, 2010

 

Exhibit 99

CDW CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in millions)

(unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2010     2009     % Change     2010     2009     % Change  

Net sales

   $ 2,374.4      $ 1,963.4        20.9   $ 6,531.8      $ 5,198.1        25.7

Cost of sales

     2,006.0        1,662.1        20.7        5,497.7        4,367.8        25.9   
                                                

Gross profit

     368.4        301.3        22.3        1,034.1        830.3        24.5   

Selling and administrative expenses

     235.8        203.4        15.9        689.7        599.4        15.1   

Advertising expense

     28.0        27.6        1.4        72.9        79.6        (8.4

Goodwill impairment

     —          —          —          —          235.0        nm   
                                                

Income (loss) from operations

     104.6        70.3        48.8        271.5        (83.7     nm   

Interest expense, net

     (105.1     (108.3     3.0        (288.7     (317.4     9.1   

Gain on extinguishment of long-term debt

     —          —          —          9.2        —          nm   

Other income, net

     0.2        0.4        (61.8     0.3        2.7        (89.9
                                                

Loss before income taxes

     (0.3     (37.6     99.1        (7.7     (398.4     98.1   

Income tax benefit

     —          12.6        (99.6     2.6        62.4        (95.8
                                                

Net loss

   $ (0.3   $ (25.0     98.9   $ (5.1   $ (336.0     98.5
                                                

 

Page 1 of 6


 

CDW CORPORATION AND SUBSIDIARIES

EBITDA AND ADJUSTED EBITDA

(dollars in millions)

(unaudited)

We have included reconciliations of EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2010 and 2009 and the trailing twelve months ended September 30, 2010 below. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA, which is a measure defined in our credit agreements, means EBITDA adjusted for certain items which are described in the table below. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service, capital expenditures, and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements.

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2010     2009     % Change     2010     2009     % Change  

Net loss

   $ (0.3   $ (25.0     $ (5.1   $ (336.0  

Depreciation and amortization

     53.3        55.2          158.5        165.1     

Income tax benefit

     —          (12.6       (2.6     (62.4  

Interest expense, net

     105.1        108.3          288.7        317.4     
                                    

EBITDA

     158.1        125.9          439.5        84.1     
                                    

Adjustments:

            

Goodwill impairment

     —          —            —          235.0     

Non-cash equity-based compensation

     (1.0     3.9          7.4        12.1     

Sponsor fee

     1.3        1.3          3.8        3.8     

Consulting and debt-related professional fees

     2.8        3.8          8.4        10.4     

Gain on extinguishment of long-term debt

     —          —            (9.2     —       

Other adjustments (1)

     2.4        (0.1       6.1        (0.7  
                                                

Adjusted EBITDA

   $ 163.6      $ 134.8        21.4   $ 456.0      $ 344.7        32.3
                                                

 

(1)

Other adjustments include certain severance and retention costs, equity investment gains and losses and the gain related to the sale of Informacast software and equipment in the first quarter of 2009.

 

     Twelve  Months
Ended

September 30, 2010
 

Net loss

   $ (42.4

Depreciation and amortization

     211.6   

Income tax benefit

     (28.1

Interest expense, net

     402.9   
        

EBITDA

     544.0   
        

Adjustments:

  

Goodwill impairment

     6.8   

Non-cash equity-based compensation

     11.3   

Sponsor fee

     5.0   

Consulting and debt-related professional fees

     12.1   

Gain on extinguishment of long-term debt

     (9.2

Other adjustments (2)

     6.6   
        

Adjusted EBITDA

   $ 576.6   
        

 

(2)

Other adjustments include certain severance and retention costs and equity investment gains and losses.

 

Page 2 of 6


 

CDW CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions)

(unaudited)

 

     September 30,
2010
    December 31,
2009
    September 30,
2009
 

Assets

      

Current assets:

      

Cash, cash equivalents and marketable securities

   $ 67.0      $ 88.0      $ 265.5   

Accounts receivable, net of allowance for doubtful accounts of $5.0, $6.3, and $7.5, respectively

     1,119.8        1,006.7        965.6   

Merchandise inventory

     304.9        257.8        261.3   

Miscellaneous receivables

     145.5        127.8        139.3   

Deferred income taxes

     23.2        40.0        38.9   

Prepaid expenses and other

     49.2        37.5        48.6   
                        

Total current assets

     1,709.6        1,557.8        1,719.2   

Property and equipment, net

     147.7        165.8        173.8   

Goodwill

     2,208.1        2,207.4        2,206.9   

Other intangible assets, net

     1,829.6        1,951.4        1,992.1   

Deferred financing costs, net

     77.0        91.2        84.3   

Other assets

     2.9        2.4        2.4   
                        

Total assets

   $ 5,974.9      $ 5,976.0      $ 6,178.7   
                        

Liabilities and Shareholders’ Deficit

      

Current liabilities:

      

Accounts payable

   $ 587.0      $ 292.3      $ 437.5   

Current maturities of long-term debt and capital leases

     22.6        22.6        22.6   

Accrued expenses and other liabilities

     396.7        319.6        342.0   
                        

Total current liabilities

     1,006.3        634.5        802.1   

Long-term liabilities:

      

Debt and capital leases

     4,270.5        4,599.3        4,605.0   

Deferred income taxes

     652.4        694.7        725.9   

Other liabilities

     82.8        92.2        76.6   
                        

Total long-term liabilities

     5,005.7        5,386.2        5,407.5   

Total shareholders’ deficit

     (37.1     (44.7     (30.9
                        

Total liabilities and shareholders’ deficit

   $ 5,974.9      $ 5,976.0      $ 6,178.7   
                        

 

Page 3 of 6


 

CDW CORPORATION AND SUBSIDIARIES

NET SALES DETAIL

(dollars in millions)

(unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2010      2009      % Change     2010      2009      % Change  

Corporate:

                

Medium / Large

   $ 973.7       $ 739.5         31.7   $ 2,831.3       $ 2,143.8         32.1

Small Business

     251.0         196.6         27.6        703.5         587.7         19.7   
                                                    

Total Corporate

   $ 1,224.7       $ 936.1         30.8   $ 3,534.8       $ 2,731.5         29.4
                                                    

Public:

                

Government

   $ 397.1       $ 415.6         (4.5 )%    $ 1,020.7       $ 898.6         13.6

Education

     392.5         338.2         16.1        958.4         817.8         17.2   

Healthcare

     262.1         194.5         34.7        723.8         529.0         36.8   
                                                    

Total Public

   $ 1,051.7       $ 948.3         10.9   $ 2,702.9       $ 2,245.4         20.4
                                                    

Other

   $ 98.0       $ 79.0         24.1   $ 294.1       $ 221.2         32.9
                                                    

Total Net Sales

   $ 2,374.4       $ 1,963.4         20.9   $ 6,531.8       $ 5,198.1         25.7
                                                    

 

Page 4 of 6


 

CDW CORPORATION AND SUBSIDIARIES

DEBT AND WORKING CAPITAL INFORMATION

(dollars in millions)

(unaudited)

 

     September 30,
2010
    December 31,
2009
    September 30,
2009
 

Debt and ABL Availability

      

Cash, cash equivalents and marketable securities

   $ 67.0      $ 88.0      $ 265.5   

Total debt (1)

   $ 4,352.0      $ 4,646.9      $ 4,716.9   

Net senior secured debt

   $ 2,356.6      $ 2,618.9      $ 2,511.5   

Borrowing base (2)

   $ 960.4      $ 855.5      $ 759.1   

Revolving credit availability

   $ 547.4      $ 229.8      $ 224.7   

Cash plus revolving credit availability

   $ 614.4      $ 317.8      $ 490.2   

Credit Agreement Coverage Ratios

      

Senior secured leverage ratio (net basis)

     4.1        5.6        5.3   

Total net leverage ratio

     7.4        9.8        9.3   

Working Capital

      

Days of sales outstanding (DSO) (3)

     43        46        41   

Days of supply in inventory (DIO) (3)

     15        15        15   

Days of purchases outstanding (DPO) (3)

     (25     (20     (22
                        

Cash conversion cycle (3)

     33        41        34   
                        

 

(1)

Includes capital lease obligations and amounts owed under trade financing agreements

(2)

Amount in effect at quarter end

(3)

Based on a rolling three month average

 

Page 5 of 6


 

CDW CORPORATION AND SUBSIDIARIES

CASH FLOW INFORMATION

(dollars in millions)

(unaudited)

 

     Nine Months Ended September 30,  
     2010     2009  

Cash flows from operating activities

   $ 397.6      $ 234.2   

Cash flows from investing activities

     (82.9     (77.8

Cash flows from financing activities

     (335.8     (5.8

Effect of exchange rate changes on cash and cash equivalents

     0.1        0.5   
                

Net (decrease) increase in cash and cash equivalents

     (21.0     151.1   

Cash and cash equivalents – beginning of period

     88.0        94.4   
                

Cash and cash equivalents – end of period

   $ 67.0      $ 245.5   
                

Supplementary disclosure of cash flow information:

    

Interest paid, including cash settlements on interest rate swap agreements

   $ 221.7      $ 231.2   

Taxes paid, net

   $ 32.6      $ 12.0   

 

Page 6 of 6