01—Abstract
Summary
Summary of the 10-K filed March 4, 2011. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation's 10-K for fiscal 2010 shows net sales rising 22.9% to $8,801.2 milliona, with a Corporate segment up 26.6% to $4,833.6 million and a Public segment up 17.3% to $3,560.6 million.
Gross profit reached $1,390.8 millionb, with gross margin flat at 15.8%. Operating income swung to $352.7 million from a loss of $31.9 million in 2009, which included a $241.8 million goodwill impairment. The company still posted a net loss of $29.2 million, driven by $391.9 million of net interest expense.
Adjusted EBITDA, the measure used in its credit agreements, rose 29.3% to $601.8 millionc. The balance sheet remains highly leveraged. Total long-term debt was $4,289.1 million at year-end, and shareholders' deficit was $(43.5) million.
During 2010 the company issued $500.0 milliond of 8.0% Senior Secured Notes due 2018 and used the proceeds to repay $500.0 million of its term loan. Operating cash flow improved to $426.9 million from $98.5 million, largely from working capital changes. The company reported a senior secured leverage ratio of 3.9 against a covenant maximum of 8.00.
Because the equity is privately held, there is no public trading market for the common stock, and no dividends were paid in 2009 or 2010. Subsequent to year-end, CDW announced a cash tender offer for its $1,207.0 million of Senior Unsecured Debt, seeking consents to remove most restrictive covenants.
It also announced plans to reprice the $1,146.1 million Extended Term Loan. The filing notes that the company expects roughly $54 million in income tax refunds in 2011 and a mandatory term-loan prepayment of about $132.0 million tied to 2010 excess cash flow.
02—Key points
Key Highlights
- Net sales increased 22.9% to $8,801.2 million in 2010 from $7,162.6 million in 2009, with 254 selling days in both years.
- Operating income was $352.7 million in 2010 versus a loss of $31.9 million in 2009, which included a $241.8 million goodwill impairment charge.
- Net loss narrowed to $29.2 million from $373.4 million; net interest expense was $391.9 million.
- Adjusted EBITDA rose 29.3% to $601.8 million, and operating cash flow was $426.9 million versus $98.5 million in 2009.
- Total long-term debt was $4,289.1 million at December 31, 2010, and total shareholders' deficit was $(43.5) million.
- In December 2010, the company issued $500.0 million of 8.0% Senior Secured Notes due 2018 and repaid $500.0 million of its term loan.
- In February 2011, the company announced a cash tender offer for its $1,207.0 million of Senior Unsecured Debt and a proposed repricing of the $1,146.1 million Extended Term Loan.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2010, CDW lost $0.00.
- Revenue$8.80B100.0%
- Cost of revenue−$7.41B84.2%
- Gross profit$1.39B15.8%
- Operating costs−$1.04B11.8%
- Operating income$352.7M4.0%
- Interest, other & tax−$381.9M4.3%
- Net income−$29.2M0.3%
Where FY2010 revenue went
$8.80B- Cost of revenue: $7.41B, 84% of revenue
- Operating income: $352.7M, 4.0% of revenue
- SG&A: $932.1M, 11% of revenue
- Other operating costs: $106.0M, 1.2% of revenue
Kept 4.0% as operating incomeOperating income $352.7M · 4.0%Other operating costs $106.0M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed March 4, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $8.80B$7.16B | +22.9% |
| Cost of Revenue | $7.41B$6.03B | +22.9% |
| Gross Profit | $1.39B$1.13B | +22.8% |
| SG&A Expenses | $932.10M$821.10M | +13.5% |
| Operating Income | $352.70M-$31.90M | +1205.6% |
| Interest Expense | $391.90M$431.70M | −9.2% |
| Net Income | -$29.20M-$373.40M | +92.2% |
| EPS (Basic) | $-0.20— | — |
| EPS (Diluted) | $-0.20— | — |
| Shares Outstanding (Basic) | 144.40M— | — |
| Shares Outstanding (Diluted) | 144.40M— | — |
05—Questions
Frequently Asked Questions
Is CDW's common stock publicly traded?
No. The filing states that the outstanding common stock is privately held, there is no established public trading market, and all of it is owned by CDW Holdings LLC. The company did not pay dividends in 2009 or 2010.
How much debt does CDW carry and how is it structured?
Total long-term debt, excluding capital leases, was $4,289.1 million at December 31, 2010, including a $1,672.5 million term loan, $500.0 million of senior secured notes, $1,207.0 million of senior unsecured debt and $721.5 million of senior subordinated debt. The company also had $188.1 million drawn on an $800.0 million revolving credit facility.
What drove the improvement in 2010 results?
The filing attributes the sales increase mainly to the rebound in the Corporate segment, which grew 26.6%, and to general growth in IT demand. Operating income improved mainly because 2009 included the $241.8 million goodwill impairment. Excluding that charge, operating income rose $142.9 million, or 68.1%.
What risks does the filing highlight for investors?
The filing highlights high leverage and restrictive covenants, variable-rate debt exposure, dependence on vendor partners (with Hewlett-Packard products representing about 24% of 2010 net sales), reliance on Public segment government spending, and competitive pricing pressure. It also notes that the equity sponsors control the company.
06—Continue