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CDW CORP
FORM 10-K
(Annual Report)
Filed 03/04/11 for the Period Ending 12/31/10
Address 200 N MILWAUKEE AVE
VERNON HILLS, IL 60061
Telephone 8474656000
CIK 0001402057
SIC Code 5961 - Catalog and Mail-Order Houses
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2013, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    CDW CORP FORM 10-K (Annual Report) Filed 03/04/11 for the Period Ending 12/31/10 Address Telephone CIK SIC Code Fiscal Year 200 N MILWAUKEE AVE VERNON HILLS, IL 60061 8474656000 0001402057 5961 - Catalog and Mail-Order Houses 12/31 http://www.edgar-online.com © Copyright 2013, EDGAR Online, ...

  • Page 2
    ... 200 N. Milwaukee Avenue Vernon Hills, Illinois (Address of principal executive offices) 60061 (Zip Code) (847) 465-6000 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to...

  • Page 3
    ...the Exchange Act). The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2010, the last business day of the registrant's most recently completed second fiscal quarter, was zero. As of February 25, 2011, there were 100,000 Class...

  • Page 4
    ... Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services 89 94 109 110 111 Market...

  • Page 5
    ...cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. We caution you that the important factors referenced above may not contain...

  • Page 6
    ... hardware, software and value-added service offerings. We serve over 250,000 customers through our experienced and dedicated sales force of more than 3,400 coworkers. We offer over 100,000 products from over 1,000 brands and a multitude of advanced technology solutions. Our broad range of technology...

  • Page 7
    ... OEMs and software publishers or from wholesale distributors. CDW is a technology solutions provider with both direct marketer and value-added reseller capabilities. Two key customer groups within our addressable market are the small and medium business market and the public sector market. The small...

  • Page 8
    ... technology specialists, who work with customers and our direct selling organization to design solutions and provide recommendations in the selection and procurement process, are an important resource and differentiator for us as we seek to expand our offerings of value-added services and solutions...

  • Page 9
    ...identify profitable growth opportunities. We intend to maintain this focus with a goal of continuing to outpace our competitors in revenue growth in the markets we serve through increased "share of wallet" from existing customers, sales to new customers and expanded IT services offerings to both new...

  • Page 10
    ... customers. In addition, we plan to leverage our significant scale to maximize the benefits from volume discounts, purchase or sales rebates, vendor incentive programs and marketing development funds. Hardware, Software and Value-Added Service Offerings Our broad offering of multi-brand products...

  • Page 11
    ..., IBM and Apple. Our hardware offerings include products across multiple categories such as network communications, notebooks/mobile devices (including tablets), data storage, video monitors, printers, desktops and servers, among others. Our multi-brand approach enables our sales force to identify...

  • Page 12
    ..., wireless, server/storage, virtualization, mobility, power and cooling, desktop, notebook, point-of-sale, managed print services, digital signage and software. Our team of more than 700 engineers, project managers, consultants and technicians in 17 geographic markets across the U.S. support design...

  • Page 13
    ..., price protection policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also operate as a reseller for major software publishers that allows the end-user customer to acquire packaged software or licensed products...

  • Page 14
    ... debt service payments on our and our subsidiaries' debt, which reduces the funds available for working capital, capital expenditures, acquisitions and other general corporate purposes; • requiring us to comply with restrictive covenants in our senior credit facilities and indentures, which limit...

  • Page 15
    ...as sales channel restrictions, product return privileges, price protection policies, purchase discounts and vendor incentive programs, including purchase rebates, sales volume rebates and cooperative advertising reimbursements. However, we do not have any long-term contracts with our vendor partners...

  • Page 16
    ...account managers, sales technology specialists and engineers to enable them to effectively sell such new offerings to customers, our business, results of operations or cash flows could be adversely affected. We also are dependent upon our vendor partners for the development and marketing of hardware...

  • Page 17
    ... field services, managed services, warranties, configuration services and partner services. Additionally, we deliver and manage mission critical software, systems and network solutions for our customers. Finally, we also offer certain services, such as implementation and installation services and...

  • Page 18
    ... facilities or customer data centers could damage our business. Substantially all of our corporate, warehouse and distribution functions are located at our Vernon Hills, Illinois facilities and our second distribution center in North Las Vegas, Nevada. If the warehouse and distribution equipment at...

  • Page 19
    ... outside of our control, including pricing pressures; changes in product costs from our vendor partners; the availability of price protection, purchase discounts and incentive programs from our vendor partners; changes in product, order size and customer mix; the risk of some items in our inventory...

  • Page 20
    ... foot distribution center in Vernon Hills, Illinois, and an approximately 513,000 square foot distribution center in North Las Vegas, Nevada. In addition, we conduct sales, services and administrative activities in various leased locations throughout North America, including data centers in Madison...

  • Page 21
    ...those agreements. The letter further requested that if we did not issue these long-term debt securities, additional interest accrue under those agreements at the same rates that would have been applicable to the long-term debt securities had they been issued on that date. If the banks were to pursue...

  • Page 22
    ... Purchases of Equity Securities Market Information Our outstanding common stock is privately held, and there is no established public trading market for our common stock. Holders All of our outstanding common stock is owned by CDW Holdings LLC. Dividends We did not pay any dividends in 2009 or 2010...

  • Page 23
    ... the assets acquired and liabilities assumed based on their estimated fair market values on October 12, 2007. This purchase price allocation resulted in significant changes to certain balance sheet items, including deferred income tax assets and liabilities, property and equipment, intangible assets...

  • Page 24
    ... equivalents and marketable securities Working capital Total assets (1) Total debt and capitalized lease obligations (2) Total shareholders' equity (deficit) Other Financial Data: Capital expenditures Depreciation and amortization Gross profit as a percentage of net sales Ratio of earnings to fixed...

  • Page 25
    $37.0 million, respectively. 21

  • Page 26
    ... Year Ended December 31, 2008 2009 2010 Net income (loss) Depreciation and amortization Income tax expense (benefit) Interest (income) expense, net EBITDA Non-cash equity-based compensation Acquisition-related costs (1) Sponsor fees Goodwill impairment Net gain on extinguishments of long-term debt...

  • Page 27
    ... expense Amortization of deferred financing costs Deferred income taxes Realized loss on interest rate swap agreements Gross excess tax benefits from equity-based compensation Changes in assets and liabilities Other non-cash items Net cash provided by (used in) operating activities $ 422.7 (28...

  • Page 28
    ...field account executives who work within an assigned territory and interact with customers in person. Our direct selling organization is supported by a team of technology specialists who design solutions and provide recommendations in the selection and procurement processes. We purchase products for...

  • Page 29
    ..., net working capital, cash conversion cycle (defined to be days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable), debt levels including available credit and leverage ratios, sales per coworker and coworker turnover...

  • Page 30
    ... and inventory price protection programs, cooperative advertising funds classified as a reduction of cost of sales, product mix, net service contract revenue, commission revenue, pricing strategies, market conditions and other factors, any of which could result in changes in gross profit margins. 26

  • Page 31
    ...related to the production of a new advertising campaign, e-commerce support and customer-focused marketing events were partially offset by decreased spending in catalog production and circulation. As a percentage of net sales, advertising expense was 1.2% in 2010...the CDW Advanced Services business, ...

  • Page 32
    ...improved profitability of our logistics operations was driven by increased operating leverage given higher purchase volumes in 2010 while support structure costs decreased between years. Partially offsetting the above items was an increase in headquarters' allocations of $6.2 million. Public segment...

  • Page 33
    ... decrease were lower average outstanding debt balances during 2010 compared to 2009. Partially offsetting these items was a higher interest rate on the senior secured term loan facility as a result of the November 2009 amendment to this facility and increased expense due to changes in the fair value...

  • Page 34
    ...) Year Ended December 31, 2010 2009 Net loss Depreciation and amortization Income tax benefit Interest expense, net EBITDA Adjustments: Goodwill impairment Non-cash equity-based compensation Sponsor fee Consulting and debt-related professional fees Net gain on extinguishments of long-term debt...

  • Page 35
    ... to 255 selling days in 2008. On an average daily basis, total net sales decreased 10.9%. The following table presents our net sales by customer channel for our Corporate and Public segments and the year-over-year dollar and percentage change in net sales for the years ended December 31, 2009...

  • Page 36
    ... lower volumes and unfavorable changes in price/mix. As a percentage of net sales, gross profit was 15.8% in 2009, compared to 16.9% in 2008. The decrease in gross profit margin between years was driven by lower product margin and, to a lesser extent, lower cooperative advertising from vendors as...

  • Page 37
    ... from operations includes the segment's direct operating income (loss) and allocations for Headquarters' costs and expenses, allocations for logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors. Includes Headquarters' function costs that are...

  • Page 38
    ... in consulting and advisory fees and expenses previously discussed and $5.3 million of higher occupancy expenses related to sales office expansion, partially offset by reductions in other areas as a result of cost savings actions. Interest expense, net At December 31, 2009, our outstanding long-term...

  • Page 39
    ... upon factors such as the successful execution of our business plan and general economic conditions. Cash Flows Cash flows from operating, investing and financing activities were as follows: (in millions) 2010 Years Ended December 31, 2009 2008 Net cash provided by (used in): Operating activities...

  • Page 40
    ... payments we made to in exchange for early pay discounts at December 31, 2010 compared to the prior year end. Accounts payable also increased more significantly in 2010 compared to the prior year to support the growth of the business and increased inventory levels. Net income as adjusted for non...

  • Page 41
    ... make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations, or engage in certain transactions with affiliates. The Revolving Loan also includes maintenance of a minimum average daily excess cash availability...

  • Page 42
    ..., 2010 under the excess cash flow provision, and we expect to make that payment within ten business days of filing of this report with the SEC. Because of the prepayments we have made on the Term Loan, we will no longer be required to pay quarterly installments of principal of $5.5 million. CDW LLC...

  • Page 43
    ... Subordinated Debt for a purchase price of $18.6 million. Since this transaction involved two members of the same consolidated group, our consolidated financial statements reflect the accounting for the transaction as if CDW LLC had acquired its own debt. As such, for purposes of financial reporting...

  • Page 44
    ... authorities, by various customers, including government agencies, relating to sales under certain contracts and by vendors. In addition, from time to time, certain of our customers file voluntary petitions for reorganization or liquidation under the U.S. bankruptcy laws. In such cases, certain pre...

  • Page 45
    ... charged an annual true-up fee for changes in the number of users over the year. With most EAs, our vendors will transfer the license and bill the customer directly, paying resellers such as us an agency fee or commission on these sales. We record these fees as a component of net sales as earned and...

  • Page 46
    ...-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. Under the market approach, we utilize valuation multiples derived from publicly available information for peer group companies to provide...

  • Page 47
    ... tax benefits in income tax expense. Recent Accounting Pronouncements Subsequent Events In February 2010, the Financial Accounting Standards Board ("FASB") issued amendments to authoritative guidance on subsequent events. The amended guidance requires that companies that file with the SEC ("SEC...

  • Page 48
    ... Disclosures of Market Risks Our market risks relate primarily to changes in interest rates. The interest rates on borrowings under our senior secured revolving credit facility and our senior secured term loan facility are floating and, therefore, are subject to fluctuations. In order to manage the...

  • Page 49
    ...Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2010 and 2009 Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008 Consolidated Statements of Shareholders' (Deficit) Equity for the years ended December...

  • Page 50
    ... control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over...

  • Page 51
    ... and Shareholders' Deficit Current liabilities: Accounts payable Current maturities of long-term debt and capital leases Fair value of interest rate swap agreements Deferred revenue Accrued expenses: Compensation Interest Sales taxes Advertising Income taxes Other Total current liabilities Long...

  • Page 52
    ...) 2010 Years Ended December 31, 2009 2008 Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Goodwill impairment Income (loss) from operations Interest expense, net Net gain on extinguishments of long-term debt Other income, net Loss before income taxes...

  • Page 53
    ... compensation expense Investment from CDW Holdings LLC Forfeitures related to MPK Coworker Incentive Plan II, net of tax Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax Other Net loss Change in unrealized loss on interest rate swap agreements, net of tax...

  • Page 54
    ... at December 31, 2008 Equity-based compensation expense Investment from CDW Holdings LLC Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax Net loss Change in unrealized loss on interest rate swap agreements, net of tax Reclassification of realized loss on...

  • Page 55
    ...of deferred financing costs Principal payments under capital lease obligations Investment from CDW Holdings LLC Forfeitures related to MPK Coworker Incentive Plan II Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and...

  • Page 56
    51

  • Page 57
    ... services in the U.S. and Canada. The Company provides comprehensive and integrated solutions for its customers' technology needs through an extensive range of hardware, software and service offerings. The Company's breadth of offerings allows its customers to streamline their procurement processes...

  • Page 58
    ... known inventory-related risks, and assumptions about future demand and market conditions. Miscellaneous Receivables Miscellaneous receivables generally consist of amounts due from vendors. The Company receives incentives from vendors related to cooperative advertising allowances, volume rebates...

  • Page 59
    ... experience. Software assurance products, third party services and extended warranties that the Company sells (for which the Company is not the primary obligor) are recognized on a net basis. Accordingly, such revenue is recognized in net sales either at the time of sale or over the contract period...

  • Page 60
    ... cost of sales. Price protection is recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable. Deferred revenue includes (1) payments received from customers in advance of providing the product or performing services, and (2) amounts deferred if other conditions of...

  • Page 61
    ...are sold, licensed or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible products essential functionality. The amended guidance will become effective for the Company beginning January 1, 2011. We do...

  • Page 62
    ... of 2010 and the next six years. The Company used a 5% long-term assumed consolidated annual growth rate for periods after the six-year forecast. The estimated future cash flows for the Corporate, Public and Canada reporting units were discounted at 12.0%; cash flows for the CDW Advanced Services...

  • Page 63
    ... AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 1, 2009 Evaluation The Company performed its annual evaluation of goodwill as of December 1, 2009. The Public, Canada and CDW Advanced Services reporting units passed the first step of the goodwill evaluation (with the fair...

  • Page 64
    ... The Company is obligated under various operating lease agreements for office facilities that generally provide for minimum rent payments and a proportionate share of operating expenses and property taxes and include certain renewal and expansion options. For the years ended December 31, 2010, 2009...

  • Page 65
    ...greater of (a) the prime rate and (b) the federal funds effective rate plus 50 basis points. The applicable margin varies (1.00% to 1.75% for LIBOR borrowings and 0.00% to 0.75% for ABR borrowings) depending upon the Company's average daily excess cash availability under the agreement. The Revolving...

  • Page 66
    ..., and the Company expects to make that payment within ten business days of filing of this report with the SEC. Because of the prepayments the Company has made on the Term Loan, the Company will no longer be required to pay quarterly installments of principal of $5.5 million. CDW LLC is the borrower...

  • Page 67
    61

  • Page 68
    ...purchase price of $18.6 million. Since this transaction involved two members of the same consolidated group, the Company's consolidated financial statements reflect the accounting for the transaction as if CDW LLC had acquired its own debt. As such, for purposes of financial reporting in the Company...

  • Page 69
    ...10, 2008, the Company was obligated to file a registration statement with the SEC within 180 days of the issuance of the initial notes, registering the offer to exchange the initial notes for freely tradable exchange notes having substantially equivalent terms. On October 25, 2010, this registration...

  • Page 70
    ... earnings. For the Company's interest rate swap not designated as a cash flow hedge of interest rate risk, changes in fair value of the swap are recorded directly to interest expense, net in the Company's consolidated statements of operations. Both of the Company's interest rate swaps were initially...

  • Page 71
    ..., the Company recognized non-cash gains due to hedge ineffectiveness for the cumulative change in fair value of the swap from the date of designation through de-designation on December 17, 2010. The amount of non-cash gains recognized into earnings during the year ended December 31, 2010 was $62...

  • Page 72
    ... loss reclassified to earnings related to the discontinued and de-designated swaps. Amounts reported in AOCI related to the Company's interest rate swap agreements will be reclassified to interest expense as interest payments are made on the Company's floating-rate debt. The Company will reclassify...

  • Page 73
    ...The counterparty credit spreads are based on publicly available credit information obtained from a third party credit data provider. The fair value of the Company's interest rate swaps, as described in Note 8, is classified as Level 2 in the hierarchy. The valuation of the swap agreements is derived...

  • Page 74
    ... tax rate expressed as a percentage of loss before income taxes and the effective tax rate is as follows: (dollars in millions) 2010 December 31, 2009 2008 Statutory federal income tax rate State taxes, net of federal effect Equity-based compensation Goodwill impairment Other Effective tax rate...

  • Page 75
    ... plans Trade credits Unrealized losses on interest rate swap agreements Accounts receivable Other Total deferred tax assets Deferred Tax Liabilities: Software and intangibles Deferred income Property and equipment Other Total deferred tax liabilities Deferred tax asset valuation allowance Net...

  • Page 76
    ... terms and subject to such conditions that are consistent with the Plan and as established by the Committee. The rights and obligations of CDW Holdings LLC and the holders of its Class A Common Units and Class B Common Units are generally set forth in the CDW Holdings LLC limited liability company...

  • Page 77
    ... equity-based compensation plans for the benefit of the Company's coworkers and senior management. Class B Common Units As described in Note 11, the CDW Holdings LLC's Board of Managers adopted the Plan pursuant to which CDW makes grants of Class B Common Units to senior management. The Plan limits...

  • Page 78
    ... based upon the average five-year volatility and the implied volatility for the Company's selected peer group, adjusted for the Company's leverage. The risk-free interest rate of return used is based on the five-year U.S. Treasury rate. The Company does not currently pay a dividend nor anticipates...

  • Page 79
    ... 15. Payments under the RDU Plan may be impacted if certain significant events occur or circumstances change that would impact the financial condition or structure of the Company. Compensation expense of $7.1 million related to the RDU Plan was recognized in the year ended December 31, 2010. As...

  • Page 80
    ... is comprised primarily of business customers, and Public, which is comprised of government entities and education and healthcare institutions. The Company also has two other operating segments, CDW Advanced Services and Canada, which do not meet the reportable segment quantitative thresholds and...

  • Page 81
    ...) 2010 Years Ended December 31, 2009 2008 Adjusted EBITDA Adjustments to reconcile Adjusted EBITDA to loss before income taxes: Depreciation and amortization Interest expense, net Goodwill impairment Non-cash equity-based compensation Sponsor fee Consulting and debt-related professional fees Net...

  • Page 82
    ... accounted for more than 10% of total net sales during 2008. During 2010, 2009 and 2008, approximately 3% of the Company's total net sales were to customers outside of the U.S., primarily in Canada. As of December 31, 2010 and 2009, approximately 1% of the Company's long-lived assets were located...

  • Page 83
    ... of Net Sales Year Ended December 31, 2009 Percentage Dollars in Millions of Net Sales Year Ended December 31, 2008 Percentage Dollars in Millions of Net Sales Hardware: NetComm Products Notebook/Mobile Devices Data Storage/Drives Other Hardware Total Hardware Software Services Other (1) Total net...

  • Page 84
    ... 2010 Consolidating Non-Guarantor Subsidiary Co-Issuer Adjustments Consolidated Assets Current assets: Cash and cash equivalents Accounts receivable, net Merchandise inventory Miscellaneous receivables Deferred income taxes Prepaid expenses and other Total current assets Property and equipment, net...

  • Page 85
    ... and equipment, net Goodwill Other intangible assets, net Other assets Investment in and advances to subsidiaries Total assets Liabilities and Shareholders' (Deficit) Equity Current liabilities: Accounts payable Current maturities of long-term debt and capital leases Fair value of interest rate swap...

  • Page 86
    ... Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense (Loss) income from operations Interest (expense) income, net (Loss) gain on extinguishments of long-term debt Other income (expense), net (Loss) income before income taxes Income tax benefit...

  • Page 87
    ... Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Goodwill impairment (Loss) income from operations Interest (expense) income, net Other (expense) income, net (Loss) income before income taxes Income tax benefit (expense) Income (loss) before equity...

  • Page 88
    ... Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Goodwill impairment (Loss) income from operations Interest (expense) income, net Other (expense) income, net (Loss) income before income taxes Income tax benefit (expense) (Loss) income before equity...

  • Page 89
    ...-term debt Payment of deferred financing costs Proceeds from borrowings under revolving credit facility Repayments of borrowings under revolving credit facility Advances to/from affiliates Other financing activities Net cash provided by (used in) financing activities Effect of exchange rate changes...

  • Page 90
    ... on interest rate swap agreements Purchases of marketable securities Redemption of marketable securities Proceeds from sale of assets Net cash (used in) provided by investing activities Cash flows from financing activities: Repayments of long-term debt Payment of deferred financing costs Advances to...

  • Page 91
    ...-term debt Proceeds from borrowings under revolving credit facility Repayments of borrowings under revolving credit facility Payment of deferred financing costs Advances to/from affiliates Other financing activities Net cash provided by (used in) financing activities Effect of exchange rate changes...

  • Page 92
    ... 20. Selected Quarterly Financial Results (unaudited) (in millions) First Quarter Second Quarter 2010 Third Quarter Fourth Quarter Net Sales Detail: Corporate: Medium/Large Small Business Total Corporate Public: Government Education Healthcare Total Public Other Net sales Gross profit Income from...

  • Page 93
    ... indenture governing the Senior Unsecured Debt. On February 23, 2011, the Company announced that it is pursuing a proposed repricing of the $1,146.1 million principal amount of the Extended Term Loan to take advantage of lower interest rates currently available in the senior secured debt market. The...

  • Page 94
    ... End of Period Balance at Allowance for doubtful accounts: Year Ended December 31, 2010 Year Ended December 31, 2009 Year Ended December 31, 2008 Inventory valuation reserve: Year Ended December 31, 2010 Year Ended December 31, 2009 Year Ended December 31, 2008 Reserve for sales returns: Year Ended...

  • Page 95
    ... term is defined in Rules13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended ("the Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's management, including the Company's Chief Executive Officer and Chief Financial...

  • Page 96
    ... where he earned a Master of Business Administration. Neal J. Campbell serves as our Senior Vice President and Chief Marketing Officer. Mr. Campbell joined CDW in January 2011, and is responsible for the strategy and development of CDW's advertising, public relations, channel marketing, marketing...

  • Page 97
    ...Vice President of Strategic Solutions and Services and is responsible for our technology specialist teams focusing on servers and storage, unified communications, security, wireless, power and cooling, networking, software licensing and mobility solutions. He also holds responsibility for CDW Canada...

  • Page 98
    ... network and information technology operations. Prior to being named Executive Vice President of Operations in March 2004, he served as Qwest's Executive Vice President of Operations and Chief Human Resources Officer. Before joining Qwest in August 2002, Mr. Allen was President of Allen Enterprises...

  • Page 99
    ... size of our Board, review of corporate governance guidelines, and oversight of programs for our managers. Compensation Committee Interlocks and Insider Participation None of our executive officers has served as a member of the Board of Directors or compensation committee of another entity that had...

  • Page 100
    ... to coworkers generally, is posted on the our website at www.cdw.com/content/about/our-values.asp. If we make any substantive amendments to this code of ethics, or grant any waiver from a provision to our principal executive officer, principal financial officer or principal accounting officer, we...

  • Page 101
    ... 2010, these named executive officers are John A. Edwardson, Chairman and Chief Executive Officer Thomas E. Richards, President and Chief Operating Officer Ann E. Ziegler, Senior Vice President and Chief Financial Officer Douglas E. Eckrote, Senior Vice President, Strategic Solutions and Services...

  • Page 102
    ... solutions provider, the Committee felt it appropriate to supplement the peer group with survey data from a technology industry survey of approximately 1,000 companies. For Mr. Edwardson, the peer group is the primary market data source, given the availability of chief executive officer compensation...

  • Page 103
    ... opportunity for an executive is generally set to provide above market median total cash compensation for performance above market growth rate expectations. Because the named executive officer base salary levels historically have been below the 50th percentile of the market data, the Committee...

  • Page 104
    96

  • Page 105
    ...Named Executive Officer Calculated SMIP Payout John A. Edwardson Thomas E. Richards Ann E. Ziegler Douglas E. Eckrote Christine A. Leahy Long-term Incentive Program $ $ $ $ $ 2,470,000 1,995,000 1,330,000 1,330,000 760,000 The equity sponsors believe that members of senior management should hold...

  • Page 106
    ... the size of the RDU awards, the Committee considered market data with respect to total target compensation and long-term incentive opportunity. Named Executive Officer Number of RDUs John A. Edwardson Thomas E. Richards Ann E. Ziegler Douglas E. Eckrote Christine A. Leahy - 5,130 3,135 2,565...

  • Page 107
    ...Total ($) Name and Principal Position John A. Edwardson Chairman and Chief Executive Officer Thomas E. Richards President and Chief Operating Officer Ann E. Ziegler Senior Vice President and Chief Financial Officer Douglas E. Eckrote Senior Vice President, Strategic Solutions and Services Christine...

  • Page 108
    ... 120% of the applicable federal long-term rate from March 2010. As noted in the Compensation Discussion and Analysis, interest earned during 2010 under the RDU Plan will be deferred until 2012. For all named executive officers, other than Mr. Edwardson, "All Other Compensation" consists of the...

  • Page 109
    ... reported as NonEquity Incentive Plan Compensation in the 2010 Summary Compensation Table. These amounts represent B Units granted in 2010 under the Company's 2007 Incentive Equity Plan. These B Units vest daily on a pro rata basis commencing on the date of grant and continuing through the five-year...

  • Page 110
    ...agreements with each named executive officer that provide for payments and other benefits upon a qualifying termination of the named executive officer. The terms of the Company's form of compensation protection agreement are described in "2010 Potential Payments upon Termination or Change in Control...

  • Page 111
    ... Fiscal Year-End The following table summarizes the number and value of unvested equity awards held by each named executive officer on December 31, 2010. Market Value of Number of Units Units That Have Name That Have Not Vested (1) Not Vested (2) John A. Edwardson Thomas E. Richards Ann E. Ziegler...

  • Page 112
    ... each named executive officer's balance in the RDU Plan. None of the amounts reported in this column as of December 31, 2010 were vested. RDU Plan As noted in the Compensation Discussion and Analysis, in connection with its review of the long-term incentive program, the Committee recommended...

  • Page 113
    ... of RDUs or B Units, as applicable, upon certain termination events or a sale of the Company. A description of the material terms of each of the employment arrangements, the RDU Plan and B Unit program as well as estimates of the payments and benefits each named executive officer would receive upon...

  • Page 114
    ... benefits so that no excise tax is incurred, is less than $100,000. The foregoing gross-up payment is applicable only in the case of the Company's first change in control following its initial public offering. RDU Plan As noted in the Compensation Discussion and Analysis and narrative to the "2010...

  • Page 115
    ... named executive officer for "good reason." Except as otherwise noted, amounts reported in this column represent two times the sum of the named executive officer's base salary and the actual annual incentive bonus earned for 2010, which was paid out at 190%, except for Mr. Edwardson, in which case...

  • Page 116
    ...) that each named executive officer would have received if a sale of the Company occurred on December 31, 2010 and the change in control payment on the RDUs. The amounts are calculated based on the $1,000 face amount of an RDU. Please see the "2010 Non-Qualified Deferred Compensation" table for...

  • Page 117
    ...John A. Edwardson, Chief Executive Officer of the Company, did not receive compensation for their Board service in 2010. The following table shows information concerning the compensation that those directors eligible to receive compensation earned during the fiscal year ended December 31, 2010: Name...

  • Page 118
    ...B Units Beneficially Owned Percent of All Units Beneficially Owned Principal Unitholders: Madison Dearborn (1) Providence Equity (2) Managers and Executive Officers: John A. Edwardson (3) Ann E. Ziegler (4) Thomas E. Richards (5) Douglas E. Eckrote (6) Jonathan J. Stevens (7) Steven W. Alesio Barry...

  • Page 119
    ... members of the Company's senior management team have purchased A Units in CDW Holdings LLC. As of December 31, 2010, executive officers owned 35,300 A Units (including deferred A Units), or approximately 1.6% of the outstanding A Units (including deferred A Units). The aggregate purchase price...

  • Page 120
    ... Senior Secured Notes in December 2010. Audit related fees include fees related to employee benefit plans. Fees in 2010 also include consultation services provided in connection with the issuance of the Company's Registration Statement on Form S-4 and certain changes to compensation plans. Tax fees...

  • Page 121
    ... documents are filed as part of this report: (1) Consolidated Financial Statements: Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2010 and 2009 Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and...

  • Page 122
    ... by the undersigned, thereunto duly authorized. CDW CORPORATION Date: March 4, 2011 By: /s/ John A. Edwardson John A. Edwardson Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

  • Page 123
    ...and Restated Limited Liability Company Agreement of CDW Government LLC, previously filed as Exhibit 3.12 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg No. 333-169258) and incorporated herein by reference. Articles of Incorporation of CDW Logistics, Inc., previously filed as Exhibit...

  • Page 124
    ..., dated as of December 17, 2010, among CDW LLC and CDW Finance Company, the Guarantors and U. S. Bank National Associate, as Trustee, governing the 8% Senior Secured Notes due 2018, previously filed as Exhibit 4.1 with CDW Corporation's Form 8-K filed on December 21, 2010 and incorporated herein by...

  • Page 125
    ... with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg No. 333-169258) and incorporated herein by reference. Form of CDW Holdings LLC (Executive) Class A Common Unit Purchase and Exchange Agreement under the CDW Holdings LLC 2007 Incentive Equity Plan (executed by John A. Edwardson, Dennis...

  • Page 126
    ...CDW Corporation's Amendment No. 1 to Form S-4 filed on October 18, 2010 (Reg No. 333-169258) and incorporated herein by reference. Computation of ratio of earnings to fixed charges. List of subsidiaries Certification of Chief Executive Officer pursuant to Rule 15d-14(a) under the Securities Exchange...

  • Page 127
    ...COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME... NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, ...

  • Page 128
    ... NOTE DUE 2015, SERIES B No. [ ] CDW LLC AND CDW FINANCE CORPORATION promise to pay to Cede & Co. or registered assigns, the principal sum set forth on the Schedule of Exchanges of Interests in the Global Note attached hereto on October 12, 2015. Interest Payment Dates: April 15 and October 15...

  • Page 129
    IN WITNESS HEREOF, the Issuers have caused this instrument to be duly executed. Dated: CDW LLC By: Name: Title: CDW FINANCE CORPORATION By: Name: Title: , 20

  • Page 130
    This is one of the Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory

  • Page 131
    ... by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR...

  • Page 132
    ... the date of repurchase. CDW must offer to repurchase the Notes at a purchase price of 100% of their principal amount, without premium, plus accrued but unpaid interest to the Redemption Date, with the Net Proceeds from certain nonordinary course Asset Sales pursuant to the terms of Section 4.10 of...

  • Page 133
    ... OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE EXCHANGE NOTES AND THE GUARANTEES. 17. CUSIP AND ISIN NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP and ISIN numbers to be printed on...

  • Page 134
    The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Issuers at the following address: CDW LLC CDW Finance Corporation 200 N. Milwaukee Avenue Vernon Hills, IL 60061 Facsimile: (847) 465-6000 Attention: Investor Relations

  • Page 135
    ... and transfer this Note to: (Insert assignee's legal name) (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's address and zip code) and irrevocably appoint substitute another to act for him. Date: Your Signature: (Sign exactly as your name appears on the face of this Note...

  • Page 136
    ... below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of this Note purchased by CDW pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $ Date: Your Signature: (Sign exactly as your name appears on the face of this Note...

  • Page 137
    ... OF INTERESTS IN THE GLOBAL NOTE The initial outstanding principal amount of this Global Note is $[ ]. The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note or exchanges of a part of another Global or Definitive Note for an interest...

  • Page 138
    ...COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME... NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, ...

  • Page 139
    ... NOTE DUE 2015, SERIES B No. [ ] CDW LLC AND CDW FINANCE CORPORATION promise to pay to Cede & Co. or registered assigns, the principal sum set forth on the Schedule of Exchanges of Interests in the Global Note attached hereto on October 12, 2015. Interest Payment Dates: April 15 and October 15...

  • Page 140
    IN WITNESS HEREOF, the Issuers have caused this instrument to be duly executed. Dated: CDW LLC By: Name: Title: CDW FINANCE CORPORATION By: Name: Title: , 20

  • Page 141
    This is one of the Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory

  • Page 142
    Senior PIK Election Exchange Note due 2015, Series B Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. CDW LLC, an Illinois limited liability company (" CDW "), and CDW Finance Corporation, a Delaware ...

  • Page 143
    ... by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR...

  • Page 144
    ... the date of repurchase. CDW must offer to repurchase the Notes at a purchase price of 100% of their principal amount, without premium, plus accrued but unpaid interest to the Redemption Date, with the Net Proceeds from certain nonordinary course Asset Sales pursuant to the terms of Section 4.10 of...

  • Page 145
    ... OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE EXCHANGE NOTES AND THE GUARANTEES. 17. CUSIP AND ISIN NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP and ISIN numbers to be printed on...

  • Page 146
    The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Issuers at the following address: CDW LLC CDW Finance Corporation 200 N. Milwaukee Avenue Vernon Hills, IL 60061 Facsimile: (847) 465-6000 Attention: Investor Relations

  • Page 147
    ... and transfer this Note to: (Insert assignee's legal name) (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's address and zip code) and irrevocably appoint substitute another to act for him. Date: Your Signature: (Sign exactly as your name appears on the face of this Note...

  • Page 148
    ... below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of this Note purchased by CDW pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $ Date: Your Signature: (Sign exactly as your name appears on the face of this Note...

  • Page 149
    ...a Definitive Note or exchanges of a part of another Global or Definitive Note for an interest in this Global Note have been made or payment of PIK Interest have ... increase Signature of authorized officer of Trustee or Custodian Date of PIK Payment/Date of Exchange Amount of increase in Principal ...

  • Page 150
    ...COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME... NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, ...

  • Page 151
    ... NOTE DUE 2017, SERIES B No. [ ] CDW LLC AND CDW FINANCE CORPORATION promise to pay to Cede & Co. or registered assigns, the principal sum set forth on the Schedule of Exchanges of Interests in the Global Note attached hereto on October 12, 2017. Interest Payment Dates: April 15 and October 15...

  • Page 152
    IN WITNESS HEREOF, the Issuers have caused this instrument to be duly executed. Dated: CDW LLC By: Name: Title: CDW FINANCE CORPORATION By: Name: Title: , 20

  • Page 153
    This is one of the Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory

  • Page 154
    ... by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR...

  • Page 155
    ... the date of repurchase. CDW must offer to repurchase the Notes at a purchase price of 100% of their principal amount, without premium, plus accrued but unpaid interest to the Redemption Date, with the Net Proceeds from certain nonordinary course Asset Sales pursuant to the terms of Section 4.10 of...

  • Page 156
    ... money or certain U.S. Government Securities for the payment of principal of, and interest on, the Notes to redemption or maturity, as the case may be. 14. AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture, the Guarantees or the Notes may be amended or supplemented as provided in the Indenture. 15...

  • Page 157
    ... other identification numbers placed thereon. The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Issuers at the following address: CDW LLC CDW Finance Corporation 200 N. Milwaukee Avenue Vernon Hills, IL 60061 Facsimile...

  • Page 158
    ... and transfer this Note to: (Insert assignee's legal name) (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's address and zip code) and irrevocably appoint substitute another to act for him. Date: Your Signature: (Sign exactly as your name appears on the face of this Note...

  • Page 159
    ... below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of this Note purchased by CDW pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $ Date: Your Signature: (Sign exactly as your name appears on the face of this Note...

  • Page 160
    ... OF INTERESTS IN THE GLOBAL NOTE The initial outstanding principal amount of this Global Note is $[ ]. The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note or exchanges of a part of another Global or Definitive Note for an interest...

  • Page 161
    ... one-third of rent expense. For the period from October 12, 2007 to December 31, 2007 and the years ended December 31, 2008, 2009 and 2010, earnings available for fixed charges were inadequate to cover fixed charges by $58.8 million, $1,777.2 million, $461.2 million and $37.0 million, respectively.

  • Page 162
    Exhibit 21.1 LIST OF SUBSIDIARIES Subsidiary Jurisdiction of Organization CDW LLC CDW Direct, LLC CDW Canada Inc. CDW Finance Corporation CDW Government LLC CDW Logistics, Inc. CDW Technologies, Inc. Illinois Illinois New Brunswick Delaware Illinois Illinois Wisconsin

  • Page 163
    ... report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ John A. Edwardson John A. Edwardson Chairman and Chief Executive Officer CDW Corporation...

  • Page 164
    ... and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Ann E. Ziegler Ann E. Ziegler Senior Vice President and Chief Financial Officer CDW...

  • Page 165
    ... UNITED STATES CODE I, John A. Edwardson, the chief executive officer of CDW Corporation ("CDW"), certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2010 (the "10-K") of CDW fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of...

  • Page 166
    ... THE UNITED STATES CODE I, Ann E. Ziegler, the chief financial officer of CDW Corporation ("CDW"), certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2010 (the "10-K") of CDW fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of...