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CDW CORP
FORM 10-K
(Annual Report)
Filed 03/09/12 for the Period Ending 12/31/11
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 03/09/12 for the Period Ending 12/31/11 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
    ... No.) 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...

  • Page 3
    None

  • Page 4
    ...About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance Item...

  • 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
    ... CDW is a leading multi-brand technology solutions provider to business, government, education and healthcare customers in the U.S. and Canada. We provide comprehensive and integrated solutions for our customers' technology needs through our extensive hardware, software and value-added service...

  • Page 7
    ... our vendor partners: Significant scale and scope We are a leading multi-brand technology solutions provider in the U.S. and Canada. Based upon publicly available information, we believe that our net sales are significantly larger than any other multi-brand direct marketer or value-added reseller in...

  • Page 8
    ...our vendor partners. In 2011, we were named Microsoft's Volume Licensing Partner of the Year and received eight Cisco Partner of the Year awards. Our Business Strategies Our goal is to continue to strengthen our position as a leading multi-brand national provider of technology products and solutions...

  • Page 9
    ... and solutions offerings, maximize sales resource coverage, strategically deploy internal sales teams, technology specialists and field sales account executives, and strengthen vendor partner relationships, all with the end goal of creating profitable sales opportunities. Some of the initiatives we...

  • Page 10
    ...installations, sales of warranties and managed services, such as remote network and data center monitoring. We offer our value-added services and solutions primarily through a team of technology specialists and engineers with more than 3,400 industry-recognized certifications, who bring deep product...

  • Page 11
    ... . Account managers provide inside sales coverage to customers, including developing customer relationships by calling existing and potential customers, providing advice on products and services and partnering with specialists to develop and sell more complex solutions. Field account executives work...

  • Page 12
    ..., 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 13
    ... pay amounts due in respect of our indebtedness. As of December 31, 2011, we had $4.1 billion of total long-term debt outstanding, as defined by accounting principles generally accepted in the United States of America ("GAAP"), and $278.7 million of obligations outstanding under our trade financing...

  • Page 14
    ... to specific terms and conditions regarding such things as sales channel restrictions, product return privileges, price protection policies, purchase discounts and vendor partner programs and funding, including purchase rebates, sales volume rebates, purchasing incentives and cooperative advertising...

  • Page 15
    ... with changes in technology and new hardware, software and services offerings, for example by providing the appropriate training to our account managers, sales technology specialists and engineers to enable them to effectively sell such new offerings to customers, our business, results of operations...

  • Page 16
    ... customers; manage our inventory and accounts receivable; purchase, sell, ship and invoice our hardware and software products and provide and invoice our services efficiently and on a timely basis; and maintain our cost-efficient operating model. The integrity of our information technology systems...

  • Page 17
    ... key executive, management, sales, services and technical coworkers. Our future success will depend to a significant extent on the efforts of Thomas E. Richards, our newly appointed Chief Executive Officer effective October 1, 2011, as well as the continued service and support of John A. Edwardson...

  • Page 18
    ... 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 becoming obsolete; increases in delivery costs that we cannot pass on to customers; and general market and competitive conditions...

  • Page 19
    ... 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 20
    Table of Contents adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters. Item 4. Mine Safety Disclosures Not applicable. 18

  • Page 21
    ... 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 2011 or 2010...

  • Page 22
    ..., legal and other third-party costs, along with non-cash equity-based compensation expense resulting from the accelerated vesting of stock options and... conditions and overall declines in net sales. During the year ended December 31, 2011, we recorded a net loss on extinguishments of long-term debt...

  • Page 23
    ...to December 31, 2007 2008 Successor Year Ended December 31, 2009 2010 2011 Statement of Operations Data: Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Goodwill impairment Income (loss) from operations Interest income (expense), net Net gain (loss) on...

  • Page 24
    inventory financing agreements. We do not include these borrowings in total debt because we have not in the past incurred, and in the future do not expect to incur, any interest expense or late fees under these agreements. (2) For purposes of calculating the ratio of earnings to fixed charges, ...

  • Page 25
    ... 31, 2007 2008 Successor Year Ended December 31, 2009 2010 2011 Net income (loss) Depreciation and amortization Income tax expense (benefit) Interest (income) expense, net EBITDA Non-cash equity-based compensation Acquisition-related costs (i) Sponsor fees Consulting and debt-related professional...

  • Page 26
    ... rate swap agreements Mark to market loss on interest rate derivatives Net (gain) loss on extinguishments of long-term debt Gross excess tax benefits from equity-based compensation Net loss (gain) on sale and disposal of assets Changes in assets and liabilities Other non-cash items Net cash provided...

  • Page 27
    ...: product return privileges, price protection policies, purchase discounts and vendor incentive programs, such as volume rebates and cooperative advertising reimbursements. We market the CDW brand on a national basis through a variety of public and community relations and corporate communications...

  • Page 28
    ... net sales to 16.5% , driven by favorable price/mix changes within product margin and a higher mix of commission and net service contract revenue. Operating income increased by 33.5% driven by sales growth, gross margin expansion and our continued focus on cost management. While economic conditions...

  • Page 29
    ... of operations, in dollars and as a percentage of net sales, for the years ended December 31, 2011 and 2010: Year Ended December 31, 2011 Dollars in Millions Percentage of Net Sales Year Ended December 31, 2010 Dollars in Millions Percentage of Net Sales Net sales Cost of sales Gross profit Selling...

  • Page 30
    ... including vendor incentive 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...

  • Page 31
    ... as a result of higher net sales and gross profit margin, partially offset by higher selling and administrative costs. In addition, Public segment income from operations benefited from an increase of $15.1 million in income allocations from our logistics operations in 2011 compared to 2010. 28

  • Page 32
    ... tax benefit of $7.8 million in 2010. The effective income tax rate, expressed as a percentage of income before income taxes, was 39.7% in 2011. An effective tax rate of 21.1% was recognized in 2010, reflecting the impact of permanent items in relation to a relatively small pre-tax loss. Net income...

  • Page 33
    ... to cash flows from operating activities. (in millions) Year Ended December 31, 2011 2010 Net income (loss) Depreciation and amortization Income tax expense (benefit) Interest expense, net EBITDA Adjustments: Non-cash equity-based compensation Sponsor fee Consulting and debt-related professional...

  • Page 34
    Net loss $ 30 (29.2) (0.3)% $ (373.4) (5.2)%

  • Page 35
    ... volume growth, most notably in notebook/mobile devices and desktop computers, as we benefited from increased demand during 2010 from our Corporate segment customers who had generally postponed spending on information technology in 2009 as a result of the economic downturn. Public segment net sales...

  • Page 36
    ... vendor incentive 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...

  • Page 37
    ...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 38
    ..., partially offset by higher intercompany allocations to the operating segments of $14.9 million. The $23.0 million cost increase in 2010 was driven by additional investments in coworkers primarily related to incentive compensation and profit sharing/401(k). Interest expense, net At December 31...

  • Page 39
    ... to customers spending their remaining technology budget dollars at the end of the year. Additionally, sales in our Public segment have historically been higher in the third quarter than in other quarters primarily due to the buying patterns of the federal government. Liquidity and Capital Resources...

  • Page 40
    ... years given the improved operating performance in 2010. In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of sales outstanding in accounts receivable plus days of supply in inventory, less days of purchases outstanding in accounts...

  • Page 41
    ..., 2011 compared to December 31, 2010 as purchase volumes increased to support higher net sales and we received more favorable payment terms for payables related to certain vendors. The one-day increase in DSO primarily reflects our overall sales growth and a higher proportion of government sales in...

  • Page 42
    ...Loan financing agreement, which excludes $6.8 million in reserves for open orders that reduce the availability under the Revolving Loan. The total amount reported on the consolidated balance sheet as accounts payable-inventory financing related to the Revolving Loan financing agreement includes $212...

  • Page 43
    ...agreement plus a reserve of 15% of open orders. The borrowing base is (a) the sum of the products of the applicable advance rates on eligible accounts receivable and on eligible inventory as defined in the agreement less (b) any reserves. At December 31, 2011, the borrowing base was $1,072.1 million...

  • Page 44
    ... of approximately $201.0 million will be due in 2012 under the excess cash flow provision with respect to the year ended December 31, 2011. The payment is due within ten business days of the filing of this report with the SEC. On February 2, 2012, we made an optional prepayment of $120.0 million...

  • Page 45
    ... limitations on the ability of Parent and each of CDW LLC's direct and indirect, wholly owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity...

  • Page 46
    ... limitations on the ability of Parent and each of CDW LLC's direct and indirect, wholly owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity...

  • Page 47
    ... 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 48
    ... 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 revenue...

  • Page 49
    ...-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 50
    ...-step goodwill impairment test for that reporting unit. This update is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011 with early adoption permitted. We plan to adopt the guidance on January 1, 2012 and do not expect the adoption...

  • Page 51
    ... revenue arrangements. From time to time, we sell some of our products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a separate unit of accounting, revenue...

  • Page 52
    ...fair value on the Company's consolidated balance sheet, with changes in fair value recorded directly to interest expense, net in the Company's consolidated statements of operations each period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and...

  • Page 53
    ... Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2011 and 2010 Consolidated Statements of Operations for the years ended...

  • Page 54
    ... Registered Public Accounting Firm Board of Directors and Shareholders CDW Corporation We have audited the accompanying consolidated balance sheet of CDW Corporation and subsidiaries as of December 31, 2011, and the related consolidated statement of operations, shareholders' (deficit) equity, and...

  • Page 55
    ... of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of CDW Corporation: In our opinion, the consolidated balance sheet as of December 31, 2010 and the related consolidated statements of operations, of shareholders' equity (deficit) and...

  • Page 56
    CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per share amounts) December 31, 2011 Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $5.4 and $5.0, respectively Merchandise inventory Miscellaneous ...

  • Page 57
    52

  • Page 58
    ... CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) Years Ended December 31, 2011 2010 2009 Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Goodwill impairment Income (loss) from operations Interest expense, net Net...

  • Page 59
    ... loss Balance at December 31, 2010 Equity-based compensation expense Investment from CDW Holdings LLC Repurchase of Class B Common Shares Accrued charitable contribution related to the MPK Coworker Incentive Plan II, net of tax Net income Reclassification of realized loss on interest rate swap...

  • Page 60
    ...to market loss on interest rate derivatives Net loss (gain) on sale and disposals of assets Other Changes in assets and liabilities: Accounts receivable Merchandise inventory Other assets Accounts payable-trade Other current liabilities Long-term liabilities Net cash provided by operating activities...

  • Page 61
    ... of cash flow information: Interest paid, including cash settlements on interest rate swap agreements Taxes refunded (paid), net Non-cash investing and financing activities: Investment in equity method investee Capital expenditures accrued in accounts payable-trade $ $ - 1.1 1.9 - $ $ (332.9) 20...

  • Page 62
    ... Accounting Policies Description of Business The Company is a leading provider of multi-branded information technology products and 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...

  • Page 63
    ...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, bid programs, price protection and other programs. These...

  • Page 64
    ... Computer and data processing equipment Computer software Furniture and fixtures 5 to 10 years 5 to 25 years 3 to 5 years 3 to 5 years 5 to 10 years The Company has asset retirement obligations associated with commitments to return property subject to operating leases to original condition upon...

  • Page 65
    ... reasonably assured. The Company's shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed to the customer. Revenues from the sales of hardware products or software products and licenses are generally recognized on a gross basis with the selling price to...

  • Page 66
    ... for changes in the number of users over the year. With most EAs, the Company's vendors will transfer the license and bill the customer directly, paying resellers such as the Company an agency fee or commission on these sales. The Company records these fees as a component of net sales as earned and...

  • Page 67
    ... goodwill impairment test for that reporting unit. This update is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011 with early adoption permitted. The Company plans to adopt this guidance on January 1, 2012 and does not expect the...

  • Page 68
    .... From time to time, the Company sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a separate unit of accounting, revenue is allocated...

  • Page 69
    .... The Company has two reportable segments: Corporate, which 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...

  • Page 70
    ... at the time the forecasts were prepared. The estimated future cash flows of each reporting unit were discounted at 11.5%. 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...

  • Page 71
    ... of CDW Advanced Services and Canada reporting units. The following table presents a summary of intangible assets at December 31, 2011 and 2010 : (in millions) Gross Carrying Amount Accumulated Amortization December 31, 2011 Net Carrying Amount Customer relationships Trade name Internally...

  • Page 72

  • Page 73
    ... under various non-cancelable 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, 2011, 2010 and 2009...

  • Page 74
    ... On June 24, 2011, the Company entered into the Revolving Loan, a new five-year $900.0 million senior secured asset-based revolving credit facility, with the facility being available to the Company for borrowings, issuance of letters of credit and floorplan financing for certain vendor products. The...

  • Page 75
    ...agreement plus a reserve of 15% of open orders. The borrowing base is (a) the sum of the products of the applicable advance rates on eligible accounts receivable and on eligible inventory as defined in the agreement less (b) any reserves. At December 31, 2011, the borrowing base was $1,072.1 million...

  • Page 76
    ... $201.0 million will be due in 2012 under the excess cash flow provision with respect to the year ended December 31, 2011. The payment is due within ten business days of the filing of this report with the SEC. On February 2, 2012, the Company made an optional prepayment of $120.0 million...

  • Page 77
    ... limitations on the ability of Parent and each of CDW LLC's direct and indirect, wholly owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity...

  • Page 78
    ... limitations on the ability of Parent and each of CDW LLC's direct and indirect, wholly owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity...

  • Page 79
    ... have not been designated as cash flow hedges of interest rate risk for GAAP accounting purposes. Instead, the interest rate cap agreements are recorded at fair value on the Company's consolidated balance sheet each period, with changes in fair value recorded directly to interest expense, net in the...

  • Page 80
    ... balance sheet. At December 31, 2011 and 2010 , the fair value carrying amount of the Company's interest rate derivatives was recorded as follows: (in millions) Balance Sheet Location Derivative Assets December 31, 2011 2010 Derivative Liabilities December 31, 2011 2010 Derivatives not designated...

  • Page 81
    Table of Contents CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The effect of derivative instruments on the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009 was as follows: Derivatives not designated as hedging instruments (in...

  • Page 82
    between market participants at the measurement date. A fair value hierarchy has been established for valuation inputs to prioritize the inputs into three levels based on the extent to which inputs used in measuring fair 74

  • Page 83
    ... credit spreads are based on publicly available credit information obtained from a third party credit data provider. 10. Income Taxes Income (loss) before income taxes was taxed under the following jurisdictions: (in millions) 2011 Years Ended December 31, 2010 2009 Domestic Foreign Total $ $ 11...

  • Page 84
    ... 31, 2011 2010 Deferred Tax Assets: Deferred interest Federal and state net operating loss and credit carryforwards, net Payroll and benefits Charitable contribution carryforward Equity compensation plans Accounts receivable Deferred financing costs Interest rate caps/hedge agreements Trade credits...

  • Page 85

  • Page 86
    ... operations. For the years ended December 31, 2011 and 2010, the Company had no liability recorded for the payment of interest and penalties on unrecognized tax benefits and did not recognize any such interest and penalty expense. 11. CDW Holdings LLC Equity The CDW Holdings LLC's Board of Managers...

  • Page 87
    ... employed or providing services to the Company or its subsidiaries as of such date. On June 30, 2011, the Board of Managers approved the terms of a modified Class B Common Unit grant agreement with John A. Edwardson, who retired as the Company's Chief Executive Officer effective October 1, 2011...

  • Page 88
    ... of CDW Holdings LLC or the Company or, in the case of the tax benefit payment, a subordinated promissory note of the Company in the event a cash payment is prohibited under a financing agreement. Valuation and Expense Information The Company has attributed the value of equity-based compensation...

  • Page 89
    ... 4.1 years. The Company's net income (loss) included $19.5 million, $11.5 million and $15.9 million of compensation cost and $1.9 million, $0.1 million and $2.6 million of income tax benefits related to the Company's equity-based compensation arrangements for the years ended December 31, 2011, 2010...

  • Page 90
    ... established under the Internal Revenue Code Section 401(k) covering substantially all coworkers. Company contributions to the profit sharing plan are made in cash and determined at the discretion of the Board of Directors. For the years ended December 31, 2011 and 2010, the amounts charged to...

  • Page 91
    .... The Company has two reportable segments: Corporate, which 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...

  • Page 92
    ...The following table presents information about the Company's segments for the years ended December 31, 2011, 2010 and 2009 : (in millions) Corporate Public Other Headquarters Total 2011: Net sales Income (loss) from operations Depreciation and amortization expense 2010: Net sales Income (loss) from...

  • Page 93
    ... for the years ended December 31, 2011, 2010 and 2009 , in accordance with Rule 3-10 of Regulation S-X. The consolidating financial information includes the accounts of CDW Corporation (the "Parent Guarantor"), which has no independent assets or operations, the accounts of CDW LLC (the "Subsidiary...

  • Page 94
    ... financing costs, net Other assets Investment in and advances to subsidiaries Total assets Liabilities and Shareholders' (Deficit) Equity Current liabilities: Accounts payable-trade $ Accounts payable-inventory financing Current maturities of long-term debt Deferred revenue Accrued expenses Total...

  • Page 95
    ...intangible assets, net Deferred financing costs, net Other assets Investment in and advances to subsidiaries Total assets Liabilities and Shareholders' (Deficit) Equity Current liabilities: Accounts payable-trade $ Accounts payable-inventory financing Current maturities of long-term debt and capital...

  • Page 96
    86

  • Page 97
    ... STATEMENTS Consolidating Statement of Operations (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Year Ended December 31, 2011 Non-Guarantor Subsidiary Co-Issuer Consolidating Adjustments Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses...

  • Page 98
    ... Statement of Operations (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Year Ended December 31, 2010 Non-Guarantor Subsidiary Co-Issuer Consolidating Adjustments Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense (Loss...

  • Page 99
    ... Statement of Operations (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Year Ended December 31, 2009 Non-Guarantor Subsidiary Co-Issuer (a) Consolidating Adjustments Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense...

  • Page 100
    ... Statement of Cash Flows (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Year Ended December 31, 2011 Non-Guarantor Subsidiary Co-Issuer Consolidating Adjustments Consolidated Net cash (used in) provided by operating activities Cash flows from investing activities: Capital...

  • Page 101
    ... debt Payment of debt financing costs Net change in accounts payable inventory financing Advances to/from affiliates Other financing activities Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash Cash and...

  • Page 102
    ... 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 debt financing costs Net change in accounts payable inventory financing Advances to/from...

  • Page 103
    ... $ 401.8 $ 128.2 $ (34.8) $ 2010 First Quarter Second Quarter 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 operations Net income (loss) $ 893...

  • Page 104
    ... 30, 2011 (in millions) As Previously Reported Revision As Revised Net cash provided by operating activities Net cash used in financing activities Net increase in cash and cash equivalents $ $ $ 207.4 (173.3) 8.0 $ $ $ (77.6) 77.6 - $ $ $ 129.8 (95.7) 8.0 Six Months Ended June 30, 2010 (in...

  • Page 105
    ... on a pro rata basis between the extended and non-extended loans. The optional prepayments will reduce the amount of the required mandatory prepayment due in 2012 under the excess cash flow provision of the Term Loan on a dollar for dollar basis with respect to the year ended December 31, 2011. 95

  • Page 106
    ... accounts: Year Ended December 31, 2011 Year Ended December 31, 2010 Year Ended December 31, 2009 Inventory valuation reserve: Year Ended December 31, 2011 Year Ended December 31, 2010 Year Ended December 31, 2009 Reserve for sales returns: Year Ended December 31, 2011 Year Ended December 31, 2010...

  • Page 107
    ... and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial...

  • Page 108
    ... Company Accounting Oversight Board (United States), the consolidated balance sheet of CDW Corporation and subsidiaries as of December 31, 2011, and the related consolidated statement of operations, shareholders' (deficit) equity and cash flows for the year ended December 31, 2011 and our report...

  • Page 109
    Table of Contents Item 9B. Other Information None. 99

  • Page 110
    ... Solutions and Services Senior Vice President, General Counsel and Corporate Secretary Senior Vice President - Operations and Chief Information Officer Senior Vice President - Public and Advanced Technology Sales Senior Vice President - Product and Partner Management Senior Vice President and Chief...

  • Page 111
    ... 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, Inc. Mr. Eckrote joined CDW in 1989 as an account manager. Mr...

  • Page 112
    ... Vice President of Product and Partner Management. Mr. Troka is responsible for managing our relationships with all of our vendor partners. In addition, he directs the day-to-day operations of our purchasing department. Mr. Troka joined CDW in 1992 as an account manager and became a sales manager...

  • Page 113
    ...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, a private equity investment and management company he founded in 2000. Previously, he served as President of Chicago-based Ameritech...

  • Page 114
    ... major corporations that strengthen the board's collective qualifications, skills and experience. Donna F. Zarcone serves as a manager of CDW Holdings and CDW LLC. Ms. Zarcone is the President and Chief Executive Officer of the Economic Club of Chicago, a position she has held since February 2012...

  • Page 115
    ... 1, 2011, as part of the Company's planned succession, Mr. Edwardson retired from the position of Chief Executive Officer of the Company and agreed to continue to serve as Chairman of the Board of Managers of CDW Holdings and CDW LLC through the end of 2012 and Mr. Richards, the Company's President...

  • Page 116
    ... median annual revenues of between $3.080 billion and $11.570 billion. For Mr. Edwardson and Mr. Richards' mid-year compensation changes related to the planned CEO succession, the Committee reviewed peer group data. For the other Named Executive Officers, the Committee reviewed blended market data...

  • Page 117
    ... position of President and Chief Executive Officer and the retirement of Mr. Edwardson. The Compensation Consultant did not provide any additional services to the Company in 2011. Role of Executive Officers The Committee is responsible for all compensation decisions for our Named Executive Officers...

  • Page 118
    ... 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 50 th percentile of market data, the Committee...

  • Page 119
    ... employment with the Company during 2011 and each received a prorated bonus opportunity reflecting the portion of the year in which each Named Executive Officer was employed by the Company. Long-Term Incentive Program The Equity Sponsors believe that members of senior management should hold...

  • Page 120
    ... Named Executive Officers, see the narrative accompanying the "2011 Non-Qualified Deferred Compensation" table and the "2011 Potential Payments Upon Termination or Change in Control" section. Severance Benefits The Company's employment arrangements with each of the Named Executive Officers provide...

  • Page 121
    ...on such review and discussion, the Compensation Committee recommended to the Board of Directors of CDW Corporation that the Compensation Discussion and Analysis be included in CDW Corporation's Annual Report on Form 10-K for the year ended December 31, 2011 and such other filings with the SEC as may...

  • Page 122
    ... Compensation Earnings ($) (5) Name and Principal Position Year Salary ($) (1) Bonus ($) (2) Stock Awards ($) (3) Option Awards ($) Non-Equity Incentive Plan Compensation ($) (4) All Other Compensation ($) (6) Total ($) Thomas E. Richards President and Chief Executive Officer 2011 2010...

  • Page 123
    ... in which each Named Executive Officer was employed by the Company. The amount actually earned by each Named Executive Officer is reported as Non-Equity Incentive Plan Compensation in the 2011 Summary Compensation Table. (2) The amount reported for Mr. Edwardson represents the number of B Units that...

  • Page 124
    ...to serve as the Company's Chief Executive Officer. Mr. Edwardson's employment agreement provided for, among other items, (i) an annual base salary of $760,000 subject to merit increases, (ii) an annual incentive bonus target of not less than $1,000,000, and (iii) a one-time grant of approximately 54...

  • Page 125
    ... at Fiscal Year-End The following table summarizes the number and market value of unvested equity awards held by each Named Executive Officer on December 31, 2011. Number of Units That Have Not Vested (1) Market Value of Units That Have Not Vested (2) Name Thomas E. Richards John A. Edwardson Ann...

  • Page 126
    ... Amounts reported in this column represent the number of the Named Executive Officer's B Units that vested during 2011. These B Units remain subject to transfer restrictions pursuant to the terms of the B Unit agreements. Following the Acquisition, the Company's equity ceased to be publicly traded...

  • Page 127
    ...B Unit program as well as estimates of the payments and benefits each Named Executive Officer would receive upon a termination of employment or sale of the Company, are set forth below. The estimates have been calculated assuming a termination date on December 30, 2011 (the last business day in 2011...

  • Page 128
    ...of two times the sum of his base salary plus his average annual incentive bonus for the last three full fiscal years. As described above, on June 30, 2011, we amended and restated Mr. Edwardson's employment agreement in connection with his announced retirement and continued service to the Company as...

  • Page 129
    ... 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 "2011...

  • Page 130
    ... employment agreement based upon the average of the annual incentive bonus amounts earned for the last three full fiscal years. The multiple is one times for the Named Executive Officers who participate in the Compensation Protection Plan, two times for Mr. Edwardson and the Named Executive Officers...

  • Page 131
    ... following a disability on December 30, 2011. The B Unit value reported in this table is based upon a valuation analysis of the "fair market value" (as defined in our applicable equity documents) of total Company equity performed on a semi-annual basis. Pursuant to the terms of the RDU Plan, in the...

  • Page 132
    ...and commenced Board service on May 23, 2011. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters All of the equity interests of CDW LLC and CDW Finance Corporation are owned by Parent, which in turn is wholly owned by CDW Holdings. CDW Holdings was...

  • Page 133
    ... Owned Percent of All Units Beneficially Owned Number of A 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) Christina M. Corley (7) Neal...

  • Page 134
    ... that may be acquired within 60 days of December 31, 2011. Item 13. Certain Relationships and Related Transactions, and Director Independence Management Services Agreement The Company is party to a management services agreement with affiliates of Madison Dearborn and Providence Equity pursuant to...

  • Page 135
    ...basis. Prior to an initial public offering or a sale of all or substantially all of CDW Holdings, each executive will be required to vote his or her units in favor of a board of managers consisting of such representatives as the Equity Sponsors designate and our Chief Executive Officer. The right of...

  • Page 136
    ...certain corporate governance rules of The Nasdaq Stock Market, Inc., including the requirement that the board of directors be composed of a majority of independent directors. Item 14. Principal Accountant Fees and Services On June 22, 2011, the Audit Committee of the Board of Managers of the Company...

  • Page 137
    ... filed as part of this report: (1) Consolidated Financial Statements: Page Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2011 and 2010 Consolidated Statements of Operations for the years...

  • Page 138
    ... Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CDW CORPORATION Date: March 9, 2012 By: /s/ Thomas E. Richards Thomas E. Richards President, Chief Executive Officer and Director Pursuant to the requirements of the...

  • Page 139
    ... and Restated Limited Liability Company Agreement of CDW Direct, LLC, previously filed as Exhibit 3.10 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. Articles of Organization of CDW Government LLC, previously filed as Exhibit...

  • Page 140
    Table of Contents

  • Page 141
    ...Exhibit 4.5 with CDW Corporation's Form 10K for the fiscal year ended December 31, 2010 and incorporated herein by reference. Form of Global Fixed Rate Senior PIK Note due 2015, Series B, previously filed as Exhibit 4.6 with CDW Corporation's Form 10-K for the fiscal year ended December 31, 2010 and...

  • Page 142
    130

  • Page 143
    ... J.P. Morgan Securities LLC as initial purchaser, previously filed as Exhibit 4.4 with CDW Corporation's Form 8-K filed on May 23, 2011 and incorporated herein by reference. Senior Notes Registration Rights Agreement, dated as of February 17, 2012, by and among CDW LLC, CDW Finance Corporation, the...

  • Page 144
    ...Exhibit Number Description 10.7 Management Services Agreement, dated as of October 12, 2007, by and between CDW Corporation, Madison Dearborn Partners V-B, L.P. and Providence Equity Partners L.L.C., previously filed as Exhibit 10.9 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg...

  • Page 145

  • Page 146
    ... and among CDW Holdings LLC, John A. Edwardson, Madison Dearborn Capital Partners V-A, L.P., Madison Dearborn Capital Partners V-C, L.P., Madison Dearborn Capital Partners V Executive-A, L.P., Providence Equity Partners VI, L.P. and Providence Equity Partners VI-A, L.P., previously filed as Exhibit...

  • Page 147
    ... XBRL Taxonomy Extension Presentation Linkbase Document _____ * Filed Herewith ** These items are furnished and not filed. *** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes...

  • Page 148
    ... January 1, 2009) WHEREAS , CDW LLC, an Illinois limited liability corporation (the "Company"), has heretofore adopted and maintains the CDW Corporation Compensation Protection Plan (the "Plan"); and WHEREAS , the Company desires to amend the Plan to give the Committee the authority to delegate...

  • Page 149
    ...Chief Executive Officer or such other executive officer. IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer this 3rd day of January, 2012. CDW LLC By: /s/ Thomas E. Richards Name: Thomas E. Richards Title: President and Chief Executive Officer

  • Page 150
    ....com September 13, 2011 By Email Christina Corley Re: Dear Chris: Letter Agreement re Sign-On Bonus, Indemnification and Defense As part of our offer of employment, CDW has agreed to pay you a one-time sign-on bonus in the amount of $78,400 to be paid within 14 days after your start date. If you...

  • Page 151
    ... yours, /s/Thomas Richards Thomas Richards President and Chief Operating Officer CDW Direct LLC I represent that I have reviewed and understand the conditions of this agreement as set forth above, that I have been given the opportunity to consult independent legal counsel, and that by signing this...

  • Page 152
    EXHIBIT 12.1 CDW CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (unaudited) (dollars in millions) Predecessor Period from January 1, 2007 to October 11, 2007 Successor Period from October 12, 2007 to December 31, 2007 Years ended December 31, 2008 2009 2010 2011 Computation of ...

  • Page 153
    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 154
    ... 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/ Thomas E. Richards Thomas E. Richards President and Chief Executive Officer CDW Corporation March 9, 2012...

  • Page 155
    ... 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 Corporation...

  • Page 156
    ...1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE I, Thomas E. Richards, the chief executive officer of CDW Corporation ("CDW"), certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2011 (the "10-K") of CDW fully complies with the requirements of Section 13(a) or 15...

  • Page 157
    ... 1350 OF CHAPTER 63 OF TITLE 18 OF 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, 2011 (the "10-K") of CDW fully complies with the requirements of Section 13(a) or 15...