01—Abstract
Summary
Summary of the 10-K filed March 9, 2012. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation is a multi-brand technology solutions provider serving business, government, education and healthcare customers in the U.S. and Canada.
For 2011, net sales rose 9.1% to $9,602.4 milliona, gross profit increased 14.1% to $1,587.4 million, and income from operations increased 33.5% to $470.7 million. Net income was $17.1 million, compared with a net loss of $29.2 million in 2010, and Adjusted EBITDA was $717.3 million, up 19.2%. The company is privately held: its common stock is owned by CDW Holdings LLC, controlled by Madison Dearborn Partners and Providence Equity Partners, and there is no public trading market for its equity.
The balance sheet remains highly leveraged. Total long-term debt was $4,066.0 millionb at December 31, 2011, with $278.7 million of obligations under inventory financing agreements and $679.3 million of additional availability under the $900.0 million Revolving Loan. Shareholders' deficit was $(7.3) million.
During 2011 the company refinanced its capital structure, issuing $1,175.0 millionc of 8.5% Senior Notes due 2019 and tendering for most of its 11.0% Senior Exchange Notes due 2015. Net interest expense fell to $324.2 million from $391.9 million, but a $118.9 million net loss on debt extinguishments reduced pre-tax income to $28.3 million. The filing also covers subsequent events in early 2012: a tender offer for the remaining $129.0 million of 2015 Senior Notes, in which $120.6 million was accepted, and $130.0 million of additional 2019 Senior Notes issued at 104.375% of par.
Optional prepayments of $180.0 milliond were made on the Term Loan, and a mandatory excess cash flow prepayment of about $201.0 million was estimated for 2012. Management expects a loss on extinguishment of approximately $9 million in the first quarter of 2012.
02—Key points
Key Highlights
- Net sales of $9,602.4 million in 2011, up 9.1% from $8,801.2 million in 2010; Corporate segment sales rose 10.4% and Public segment sales rose 5.5%.
- Gross profit margin rose to 16.5% from 15.8%, and income from operations rose 33.5% to $470.7 million.
- Net income of $17.1 million, compared with a net loss of $29.2 million in 2010, after a $118.9 million net loss on extinguishment of long-term debt.
- Adjusted EBITDA of $717.3 million, up 19.2%; the senior secured leverage ratio decreased to 2.7 from 3.9.
- Total long-term debt of $4,066.0 million at year-end 2011, with the Revolving Loan's $679.3 million of additional borrowing capacity.
- Operating cash flow was $214.7 million in 2011, down from $423.7 million in 2010, mainly due to changes in assets and liabilities.
- Refinancing activity in 2011 and early 2012 included $1,175.0 million of 8.5% Senior Notes due 2019 and tenders for most of the 2015 Senior Notes.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, CDW kept $0.00.
- Revenue$9.60B100.0%
- Cost of revenue−$8.02B83.5%
- Gross profit$1.58B16.5%
- Operating costs−$1.11B11.6%
- Operating income$470.7M4.9%
- Interest, other & tax−$453.6M4.7%
- Net income$17.1M0.2%
Where FY2011 revenue went
$9.60B- Cost of revenue: $8.02B, 84% of revenue
- Net income: $17.1M, 0.2% of revenue
- SG&A: $990.1M, 10% of revenue
- Other operating costs: $122.7M, 1.3% of revenue
- Interest, other & tax: $453.6M, 4.7% of revenue
Kept 0.2% as net incomeNet income $17.1M · 0.2%Other operating costs $122.7M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed March 9, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $9.60B$8.80B | +9.1% |
| Cost of Revenue | $8.02B$7.41B | +8.2% |
| Gross Profit | $1.58B$1.39B | +13.9% |
| SG&A Expenses | $990.10M$932.10M | +6.2% |
| Operating Income | $470.70M$352.70M | +33.5% |
| Interest Expense | $324.20M$391.90M | −17.3% |
| Net Income | $17.10M-$29.20M | +158.6% |
| EPS (Basic) | $0.12$-0.20 | +160.0% |
| EPS (Diluted) | $0.12$-0.20 | +160.0% |
| Shares Outstanding (Basic) | 144.80M144.40M | +0.3% |
| Shares Outstanding (Diluted) | 144.90M144.40M | +0.3% |
05—Questions
Frequently Asked Questions
Can investors buy CDW Corporation's common stock?
No. The filing states that the company's outstanding common stock is privately held, that there is no established public trading market for it, and that all of it is owned by CDW Holdings LLC. The equity sponsors, Madison Dearborn Partners and Providence Equity Partners, control the company.
How much debt does CDW carry and what are its main obligations?
At December 31, 2011, long-term debt excluding capital leases totaled $4,066.0 million. The main components were a $1,540.5 million senior secured term loan, $1,175.0 million of 8.5% Senior Notes due 2019, $721.5 million of Senior Subordinated Notes, $500.0 million of 8.0% Senior Secured Notes and $129.0 million of Senior Notes due 2015. The company also owed $278.7 million under inventory financing agreements.
What drove the improvement in 2011 results?
The filing attributes higher net sales and gross profit, with gross margin up 70 basis points from favorable price/mix and a higher mix of commission and net service contract revenue. Lower interest expense also contributed, though a $118.9 million loss on debt extinguishments offset much of the benefit.
What did CDW do with its debt after year-end 2011?
In February 2012 the company made optional Term Loan prepayments of $120.0 million and $60.0 million. It also issued $130.0 million of additional 2019 Senior Notes at 104.375% of par and accepted $120.6 million of the outstanding Senior Notes in a tender offer, with the remaining $8.3 million called for redemption on March 19, 2012.
Which vendors and customers are most important to CDW?
Sales of Hewlett-Packard products represented approximately 24% of 2011 net sales. Federal government sales accounted for approximately 10% of net sales, and the company stated that its next five largest customers together represented less than 2%. Purchases from distributors Ingram Micro, Tech Data and SYNNEX represented 11%, 10% and 9% of total purchases, respectively.
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