01—Abstract
Summary
Summary of the 10-K filed March 8, 2013. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation, a Fortune 500 provider of integrated IT solutions in the U.S. and Canada, reported 2012 net sales of $10,128.2 milliona, up 5.5% from $9,602.4 million in 2011, with income from operations of $510.6 million (up 8.5%) and net income of $119.0 million, compared with $17.1 million in 2011.
Adjusted EBITDA rose 6.9% to $766.6 millionb. Gross profit was flat as a percentage of sales at 16.5%, and the company cited more cautious customer spending beginning in the second quarter of 2012 and an expectation that this would continue into 2013. The balance sheet remains highly leveraged.
Total long-term debt was $3,771.0 millionc at December 31, 2012, down from $4,066.0 million a year earlier, and net debt declined $233.0 million to $3,733.1 million. The company had $1,339.5 million of variable rate debt, a senior secured leverage ratio of 2.4, and could borrow up to an additional $622.4 million under its Revolving Loan. Shareholders' equity turned positive at $136.5 million from a deficit of $7.3 million.
The company paid no dividends in 2012 or 2011, and its equity is privately held by CDW Holdings LLC, controlled by Madison Dearborn Partners and Providence Equity Partners, so there is no public trading market for its stock. Key risks disclosed include dependence on vendor partners with no long-term contracts, concentration in products from Hewlett-Packard (21% of 2012 net sales) and Cisco (13%), exposure to government spending (federal sales about 10% of net sales), and the restrictive covenants and debt service obligations that come with the company's leverage. Subsequent to year end, CDW made a $40.0 milliond optional prepayment on its term loan and called $50.0 million of senior subordinated notes for redemption.
02—Key points
Key Highlights
- Net sales rose 5.5% to $10,128.2 million in 2012; on an average daily basis, net sales increased 5.9%.
- Income from operations increased 8.5% to $510.6 million, and net income rose to $119.0 million from $17.1 million in 2011.
- Adjusted EBITDA increased 6.9% to $766.6 million, and the cash conversion cycle improved from 27 days to 24 days.
- Total long-term debt fell to $3,771.0 million from $4,066.0 million, and net debt decreased $233.0 million to $3,733.1 million.
- Shareholders' equity improved to $136.5 million from a deficit of $7.3 million at year-end 2011.
- Healthcare channel net sales grew 18.1% to $1,436.6 million, while Corporate segment sales grew 3.3%.
- Concentration risk: Hewlett-Packard and Cisco products represented 21% and 13% of 2012 net sales, and federal government sales were approximately 10%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, CDW kept $0.01.
- Revenue$10.13B100.0%
- Cost of revenue−$8.46B83.5%
- Gross profit$1.67B16.5%
- Operating costs−$1.16B11.4%
- Operating income$510.6M5.0%
- Interest, other & tax−$391.6M3.9%
- Net income$119.0M1.2%
Where FY2012 revenue went
$10.13B- Cost of revenue: $8.46B, 84% of revenue
- Net income: $119.0M, 1.2% of revenue
- SG&A: $1.03B, 10% of revenue
- Other operating costs: $129.5M, 1.3% of revenue
- Interest, other & tax: $391.6M, 3.9% of revenue
Kept 1.2% as net incomeNet income $119.0M · 1.2%Other operating costs $129.5M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed March 8, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $10.13B$9.60B | +5.5% |
| Cost of Revenue | $8.46B$8.02B | +5.5% |
| Gross Profit | $1.67B$1.58B | +5.4% |
| SG&A Expenses | $1.03B$990.10M | +4.0% |
| Operating Income | $510.60M$470.70M | +8.5% |
| Interest Expense | $307.40M$324.20M | −5.2% |
| Net Income | $119.00M$17.10M | +595.9% |
| EPS (Basic) | $0.82$0.12 | +583.3% |
| EPS (Diluted) | $0.82$0.12 | +583.3% |
| Shares Outstanding (Basic) | 145.10M144.80M | +0.2% |
| Shares Outstanding (Diluted) | 145.80M144.90M | +0.6% |
05—Questions
Frequently Asked Questions
How did CDW perform financially in 2012?
Net sales increased 5.5% to $10,128.2 million, gross profit rose 5.4% to $1,669.6 million, and income from operations increased 8.5% to $510.6 million. Net income was $119.0 million, compared with $17.1 million in 2011, which included larger losses on debt extinguishments.
How much debt does CDW carry and how has it changed?
Total long-term debt was $3,771.0 million at December 31, 2012, down from $4,066.0 million at December 31, 2011. Of this, $1,339.5 million was variable rate debt. The company had no outstanding borrowings under its $900.0 million Revolving Loan and could borrow up to an additional $622.4 million under it.
Can investors buy CDW common stock on a public exchange?
No. The filing states that the company's outstanding common stock is privately held, there is no established public trading market for it, and all of it is owned by CDW Holdings LLC. The company also paid no dividends in 2012 or 2011.
What are the main risks to CDW's business?
Key risks include reliance on vendor partners, most of which have no long-term contracts; concentration in products from Hewlett-Packard and Cisco; sensitivity to government spending, with federal sales about 10% of net sales; intense competition; and the operational and covenant risks that come with high leverage. The filing also notes that customers became more cautious about spending from the second quarter of 2012.
Who controls CDW?
Parent is owned by CDW Holdings LLC, which is controlled by investment funds affiliated with Madison Dearborn Partners, LLC and Providence Equity Partners L.L.C. The filing states these Equity Sponsors control the company and can elect all members of Parent's board, and that their interests may differ from those of other stakeholders.
06—Continue