01—Abstract
Summary
Summary of the 10-K/A filed November 8, 2013. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation's Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2012 reports net sales of $10.13 billiona, up 5.5% from $9.60 billion in 2011, with net income of $119.0 million versus $17.1 million the prior year.
Gross profit rose to $1.67 billionb (16.5% of net sales in both years), and income from operations increased to $510.6 million from $470.7 million. Adjusted EBITDA, the measure used in the company's credit agreements, was $766.6 million, up from $717.3 million. The company is privately held: CDW Holdings LLC owns all outstanding common stock, controlled by Madison Dearborn and Providence Equity affiliates, and there is no public trading market.
The filing states that no dividends were paid in 2012 or 2011. Leverage remains the central investor consideration. Total long-term debt was $3.77 billionc at year-end 2012, with $249.2 million of inventory financing obligations and $622.4 million of available borrowings under the $900 million Revolving Loan.
The filing describes several subsequent refinancing and repayment actions in 2013, including a new $1,350.0 milliond term loan facility entered April 29, 2013, and a conditional notice to redeem $175.0 million of Senior Secured Notes tied to a proposed initial public offering. The company also disclosed significant deferred cancellation of debt income that will become taxable beginning in 2014, and a 110% test that could accelerate tax payments if dividends or distributions are made.
The filing notes that the Form 10-K/A was signed on November 8, 2013, and that the board approved a reclassification of Class A and Class B shares into a single class and a 143.0299613-for-1 stock split in June 2013, with per-share amounts restated accordingly. Concentration is a notable feature: sales of products from Hewlett-Packard and Cisco were 21% and 13% of 2012 net sales, and federal government sales were approximately 10%.
02—Key points
Key Highlights
- Net sales rose 5.5% to $10,128.2 million in 2012, with healthcare channel sales up 18.1% to $1,436.6 million.
- Net income increased to $119.0 million in 2012 from $17.1 million in 2011; income from operations rose 8.5% to $510.6 million.
- Adjusted EBITDA was $766.6 million in 2012, up 6.9% from $717.3 million, and is the primary measure used in the credit agreement covenants.
- Total long-term debt was $3,771.0 million at December 31, 2012, with a senior secured leverage ratio of 2.4 for the four quarters ended that date.
- Operating cash flow improved to $317.4 million in 2012 from $214.7 million, while the cash conversion cycle shortened to 24 days from 28.
- Subsequent events include a new $1,350.0 million term loan facility (April 2013) and a planned $175.0 million redemption of Senior Secured Notes funded from a proposed initial public offering.
- HP and Cisco products represented 21% and 13% of 2012 net sales, respectively, indicating vendor concentration.
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-K/AFY2012filed November 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
Is CDW's common stock publicly traded?
No. The filing states that the company's outstanding common stock is privately held, there is no established public trading market, and all common stock is owned by CDW Holdings LLC. The aggregate market value held by non-affiliates as of June 30, 2012 was reported as zero.
How much debt does CDW carry and how much more can it borrow?
At December 31, 2012, total long-term debt was $3,771.0 million, and $249.2 million of inventory financing obligations were outstanding. Under the $900 million Revolving Loan, the company had no borrowings outstanding and could borrow up to an additional $622.4 million after borrowing base limits and reserves.
Did CDW pay dividends?
No dividends were paid in 2012 or 2011. The senior credit agreements and indentures restrict dividend payments, and the filing notes that a dividend before 2018 could accelerate tax on deferred cancellation of debt income if the company fails the 110% test.
What drove the improvement in 2012 results?
The filing attributes higher net sales to general volume growth, market share gains, and a more tenured sales force. Healthcare sales growth of $220.6 million and Corporate segment growth of $178.4 million contributed, while selling and administrative expenses rose 4.0% to $1,029.5 million, below the rate of sales growth.
What is the company's exposure to key vendors and government customers?
Sales of products from Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft represented 56% of 2012 net sales, with Hewlett-Packard and Cisco at 21% and 13%. Federal government sales were approximately 10% of net sales, and the company has no long-term contracts with its vendor partners, many of which are terminable upon notice.
06—Continue