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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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26-0273989
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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200 N. Milwaukee Avenue
Vernon Hills, Illinois
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60061
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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x
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page
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PART I
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FINANCIAL INFORMATION
|
|
Item 1.
|
|
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||
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Item 2.
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Item 3.
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Item 4.
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PART II
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OTHER INFORMATION
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Item 1.
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||
Item 1A.
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||
Item 2.
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Item 3.
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||
Item 4.
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Item 5.
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Item 6.
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SIGNATURES
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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per-share amounts)
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|||||||
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September 30,
2013
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|
December 31, 2012
|
||||
Assets
|
(unaudited)
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
350.2
|
|
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$
|
37.9
|
|
Accounts receivable, net of allowance for doubtful accounts of $5.4 and $5.4, respectively
|
1,310.6
|
|
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1,285.0
|
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||
Merchandise inventory
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353.8
|
|
|
314.6
|
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||
Miscellaneous receivables
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197.1
|
|
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148.5
|
|
||
Deferred income taxes
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10.9
|
|
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14.1
|
|
||
Prepaid expenses and other
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63.1
|
|
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34.6
|
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||
Total current assets
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2,285.7
|
|
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1,834.7
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||
Property and equipment, net
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129.6
|
|
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142.7
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||
Goodwill
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2,222.9
|
|
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2,209.3
|
|
||
Other intangible assets, net
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1,365.5
|
|
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1,478.5
|
|
||
Deferred financing costs, net
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33.7
|
|
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53.2
|
|
||
Other assets
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1.4
|
|
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1.6
|
|
||
Total assets
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$
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6,038.8
|
|
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$
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5,720.0
|
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Liabilities and Shareholders’ Equity
|
|
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||||
Current liabilities:
|
|
|
|
||||
Accounts payable—trade
|
$
|
672.6
|
|
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$
|
518.6
|
|
Accounts payable—inventory financing
|
225.2
|
|
|
249.2
|
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||
Current maturities of long-term debt
|
170.4
|
|
|
40.0
|
|
||
Deferred revenue
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82.5
|
|
|
57.8
|
|
||
Accrued expenses:
|
|
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||||
Compensation
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93.6
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99.4
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||
Interest
|
78.4
|
|
|
50.7
|
|
||
Sales taxes
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23.3
|
|
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22.6
|
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||
Advertising
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34.4
|
|
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33.9
|
|
||
Income taxes
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—
|
|
|
0.2
|
|
||
Other
|
116.1
|
|
|
95.8
|
|
||
Total current liabilities
|
1,496.5
|
|
|
1,168.2
|
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||
Long-term liabilities:
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||||
Debt
|
3,239.7
|
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3,731.0
|
|
||
Deferred income taxes
|
599.4
|
|
|
624.3
|
|
||
Accrued interest
|
2.5
|
|
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8.0
|
|
||
Other liabilities
|
40.9
|
|
|
52.0
|
|
||
Total long-term liabilities
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3,882.5
|
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4,415.3
|
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||
Commitments and contingencies
|
|
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Shareholders’ equity:
|
|
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||||
Preferred shares, $0.01 par value, 100.0 and no shares authorized, respectively; no shares issued or outstanding for both periods
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—
|
|
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—
|
|
||
Common shares, $0.01 par value, 1,000.0 and 286.1 shares authorized, respectively; 172.0 and 145.2 shares issued, respectively; 172.0 and 145.1 shares outstanding, respectively
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1.7
|
|
|
1.4
|
|
||
Paid-in capital
|
2,685.8
|
|
|
2,207.7
|
|
||
Accumulated deficit
|
(2,024.4
|
)
|
|
(2,073.0
|
)
|
||
Accumulated other comprehensive (loss) income
|
(3.3
|
)
|
|
0.4
|
|
||
Total shareholders’ equity
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659.8
|
|
|
136.5
|
|
||
Total liabilities and shareholders’ equity
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$
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6,038.8
|
|
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$
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5,720.0
|
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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(unaudited)
|
||||||||||||||||
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||
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2013
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2012
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2013
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2012
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||||||||
Net sales
|
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$
|
2,864.3
|
|
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$
|
2,623.3
|
|
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$
|
8,055.3
|
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$
|
7,527.2
|
|
Cost of sales
|
|
2,405.9
|
|
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2,190.6
|
|
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6,743.3
|
|
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6,283.0
|
|
||||
Gross profit
|
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458.4
|
|
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432.7
|
|
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1,312.0
|
|
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1,244.2
|
|
||||
Selling and administrative expenses
|
|
332.4
|
|
|
257.0
|
|
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850.3
|
|
|
768.1
|
|
||||
Advertising expense
|
|
33.1
|
|
|
36.0
|
|
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95.1
|
|
|
96.4
|
|
||||
Income from operations
|
|
92.9
|
|
|
139.7
|
|
|
366.6
|
|
|
379.7
|
|
||||
Interest expense, net
|
|
(56.2
|
)
|
|
(76.7
|
)
|
|
(198.6
|
)
|
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(232.5
|
)
|
||||
Net loss on extinguishments of long-term debt
|
|
(41.3
|
)
|
|
—
|
|
|
(55.5
|
)
|
|
(9.4
|
)
|
||||
Other (expense) income, net
|
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(0.2
|
)
|
|
0.2
|
|
|
0.4
|
|
|
0.2
|
|
||||
(Loss) income before income taxes
|
|
(4.8
|
)
|
|
63.2
|
|
|
112.9
|
|
|
138.0
|
|
||||
Income tax benefit (expense)
|
|
2.6
|
|
|
(25.2
|
)
|
|
(40.1
|
)
|
|
(52.3
|
)
|
||||
Net (loss) income
|
|
$
|
(2.2
|
)
|
|
$
|
38.0
|
|
|
$
|
72.8
|
|
|
$
|
85.7
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income per common share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
0.26
|
|
|
$
|
0.48
|
|
|
$
|
0.59
|
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.26
|
|
|
$
|
0.47
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
166.8
|
|
|
145.1
|
|
|
152.5
|
|
|
145.0
|
|
||||
Diluted
|
|
166.8
|
|
|
145.9
|
|
|
154.3
|
|
|
145.8
|
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)
(unaudited)
|
||||||||||||||||
|
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Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net (loss) income
|
|
$
|
(2.2
|
)
|
|
$
|
38.0
|
|
|
$
|
72.8
|
|
|
$
|
85.7
|
|
Foreign currency translation adjustment
|
|
2.0
|
|
|
3.1
|
|
|
(3.7
|
)
|
|
3.4
|
|
||||
Other comprehensive income (loss)
|
|
$
|
2.0
|
|
|
$
|
3.1
|
|
|
$
|
(3.7
|
)
|
|
$
|
3.4
|
|
Comprehensive (loss) income
|
|
$
|
(0.2
|
)
|
|
$
|
41.1
|
|
|
$
|
69.1
|
|
|
$
|
89.1
|
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in millions)
(unaudited)
|
||||||||||||||||||||||||
|
|
Total
Shareholders’
Equity
|
|
Preferred Shares
|
|
Common
Shares
|
|
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive (Loss) Income
|
||||||||||||
Balance at December 31, 2012
|
|
$
|
136.5
|
|
|
$
|
—
|
|
|
$
|
1.4
|
|
|
$
|
2,207.7
|
|
|
$
|
(2,073.0
|
)
|
|
$
|
0.4
|
|
Equity-based compensation expense
|
|
44.3
|
|
|
—
|
|
|
—
|
|
|
44.3
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of common shares
|
|
424.7
|
|
|
—
|
|
|
0.3
|
|
|
424.4
|
|
|
—
|
|
|
—
|
|
||||||
Repurchase of common shares
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
||||||
Reclassification to goodwill for accrued charitable contributions
|
|
9.4
|
|
|
—
|
|
|
—
|
|
|
9.4
|
|
|
—
|
|
|
—
|
|
||||||
Incentive compensation plan units withheld for taxes
|
|
(24.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24.1
|
)
|
|
—
|
|
||||||
Net income
|
|
72.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72.8
|
|
|
—
|
|
||||||
Foreign currency translation adjustment
|
|
(3.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.7
|
)
|
||||||
Balance at September 30, 2013
|
|
$
|
659.8
|
|
|
$
|
—
|
|
|
$
|
1.7
|
|
|
$
|
2,685.8
|
|
|
$
|
(2,024.4
|
)
|
|
$
|
(3.3
|
)
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
|
||||||||
|
|
Nine Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
72.8
|
|
|
$
|
85.7
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
156.3
|
|
|
159.1
|
|
||
Equity-based compensation expense
|
|
44.3
|
|
|
18.0
|
|
||
Deferred income taxes
|
|
(21.3
|
)
|
|
(48.1
|
)
|
||
Amortization of deferred financing costs, debt premium, and debt discount, net
|
|
7.1
|
|
|
10.8
|
|
||
Net loss on extinguishments of long-term debt
|
|
55.5
|
|
|
9.4
|
|
||
Other
|
|
0.1
|
|
|
0.9
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
(27.9
|
)
|
|
(20.3
|
)
|
||
Merchandise inventory
|
|
(39.2
|
)
|
|
(25.1
|
)
|
||
Other assets
|
|
(72.2
|
)
|
|
(43.2
|
)
|
||
Accounts payable-trade
|
|
154.8
|
|
|
172.7
|
|
||
Other current liabilities
|
|
47.0
|
|
|
47.1
|
|
||
Long-term liabilities
|
|
(6.5
|
)
|
|
0.1
|
|
||
Net cash provided by operating activities
|
|
370.8
|
|
|
367.1
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Capital expenditures
|
|
(30.5
|
)
|
|
(25.4
|
)
|
||
Net cash used in investing activities
|
|
(30.5
|
)
|
|
(25.4
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Proceeds from borrowings under revolving credit facility
|
|
63.0
|
|
|
256.0
|
|
||
Repayments of borrowings under revolving credit facility
|
|
(63.0
|
)
|
|
(256.0
|
)
|
||
Repayments of long-term debt
|
|
(47.2
|
)
|
|
(201.0
|
)
|
||
Proceeds from issuance of long-term debt
|
|
1,535.2
|
|
|
135.7
|
|
||
Payments to extinguish long-term debt
|
|
(1,885.9
|
)
|
|
(136.9
|
)
|
||
Payments of debt financing costs
|
|
(6.0
|
)
|
|
(2.1
|
)
|
||
Net change in accounts payable-inventory financing
|
|
(24.0
|
)
|
|
(44.6
|
)
|
||
Payment of incentive compensation plan withholding taxes
|
|
(24.1
|
)
|
|
—
|
|
||
Net proceeds from issuance of common shares
|
|
424.7
|
|
|
—
|
|
||
Repurchase of common shares
|
|
(0.1
|
)
|
|
(0.4
|
)
|
||
Net cash used in financing activities
|
|
(27.4
|
)
|
|
(249.3
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(0.6
|
)
|
|
0.7
|
|
||
Net increase in cash and cash equivalents
|
|
312.3
|
|
|
93.1
|
|
||
Cash and cash equivalents—beginning of period
|
|
37.9
|
|
|
99.9
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
350.2
|
|
|
$
|
193.0
|
|
Supplementary disclosure of cash flow information:
|
|
|
|
|
||||
Interest paid
|
|
$
|
(169.5
|
)
|
|
$
|
(165.6
|
)
|
Taxes paid, net
|
|
$
|
(64.3
|
)
|
|
$
|
(81.9
|
)
|
1.
|
Description of Business and Summary of Significant Accounting Policies
|
2.
|
Recent Accounting Pronouncements
|
3.
|
Inventory Financing Agreements
|
(in millions)
|
|
September 30, 2013
|
|
December 31, 2012
|
||||
Revolving Loan inventory financing agreement
|
|
$
|
223.7
|
|
|
$
|
248.3
|
|
Other inventory financing agreements
|
|
1.5
|
|
|
0.9
|
|
||
Accounts payable-inventory financing
|
|
$
|
225.2
|
|
|
$
|
249.2
|
|
4.
|
Long-Term Debt
|
(dollars in millions)
|
|
Interest
Rate
(1)
|
|
September 30,
2013
|
|
December 31,
2012
|
|||||
Senior secured asset-based revolving credit facility
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
Senior secured term loan facility
|
|
3.5
|
%
|
|
1,532.8
|
|
|
1,339.5
|
|
||
Unamortized discount on senior secured term loan facility
|
|
|
|
(4.6
|
)
|
|
—
|
|
|||
Senior secured notes due 2018
|
|
8.0
|
%
|
|
325.0
|
|
|
500.0
|
|
||
Senior notes due 2019
|
|
8.5
|
%
|
|
1,305.0
|
|
|
1,305.0
|
|
||
Unamortized premium on senior notes due 2019
|
|
|
|
4.4
|
|
|
5.0
|
|
|||
Senior subordinated notes due 2017
|
|
12.535
|
%
|
|
247.5
|
|
|
621.5
|
|
||
Total long-term debt
|
|
|
|
3,410.1
|
|
|
3,771.0
|
|
|||
Less current maturities of long-term debt
|
|
|
|
(170.4
|
)
|
|
(40.0
|
)
|
|||
Long-term debt, excluding current maturities
|
|
|
|
$
|
3,239.7
|
|
|
$
|
3,731.0
|
|
5.
|
Income Taxes
|
6.
|
Shareholders' Equity
|
(in millions)
|
|
Three Months Ended September 30, 2013
|
|
Nine Months Ended September 30, 2013
|
||||
Acceleration charge for certain equity awards and related employer payroll taxes
(1)
|
|
$
|
40.7
|
|
|
$
|
40.7
|
|
RDU Plan cash retention pool accrual
(2)
|
|
7.5
|
|
|
7.5
|
|
||
Management services agreement termination fee
(3)
|
|
24.4
|
|
|
24.4
|
|
||
Other expenses
|
|
1.5
|
|
|
1.7
|
|
||
Total IPO related expenses
|
|
$
|
74.1
|
|
|
$
|
74.3
|
|
7.
|
Equity-Based Compensation
|
8.
|
Earnings per Share
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
(in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Weighted-average shares - basic
|
166.8
|
|
|
145.1
|
|
|
152.5
|
|
|
145.0
|
|
Effect of dilutive securities
|
—
|
|
|
0.8
|
|
|
1.8
|
|
|
0.8
|
|
Weighted-average shares - diluted
|
166.8
|
|
|
145.9
|
|
|
154.3
|
|
|
145.8
|
|
9.
|
Deferred Compensation Plan
|
10.
|
Commitments and Contingencies
|
11.
|
Segment Information
|
(in millions)
|
|
Corporate
|
|
Public
|
|
Other
|
|
Headquarters
|
|
Total
|
||||||||||
Three Months Ended September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
1,465.8
|
|
|
$
|
1,244.6
|
|
|
$
|
153.9
|
|
|
$
|
—
|
|
|
$
|
2,864.3
|
|
Income (loss) from operations
|
|
63.2
|
|
|
71.1
|
|
|
3.7
|
|
|
(45.1
|
)
|
|
92.9
|
|
|||||
Depreciation and amortization expense
|
|
(24.3
|
)
|
|
(11.0
|
)
|
|
(2.1
|
)
|
|
(14.6
|
)
|
|
(52.0
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
1,312.8
|
|
|
$
|
1,163.7
|
|
|
$
|
146.8
|
|
|
$
|
—
|
|
|
$
|
2,623.3
|
|
Income (loss) from operations
|
|
79.2
|
|
|
81.1
|
|
|
5.6
|
|
|
(26.2
|
)
|
|
139.7
|
|
|||||
Depreciation and amortization expense
|
|
(24.4
|
)
|
|
(11.0
|
)
|
|
(2.3
|
)
|
|
(15.7
|
)
|
|
(53.4
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
4,407.1
|
|
|
$
|
3,174.0
|
|
|
$
|
474.2
|
|
|
$
|
—
|
|
|
$
|
8,055.3
|
|
Income (loss) from operations
|
|
260.5
|
|
|
185.8
|
|
|
18.6
|
|
|
(98.3
|
)
|
|
366.6
|
|
|||||
Depreciation and amortization expense
|
|
(73.1
|
)
|
|
(33.1
|
)
|
|
(6.6
|
)
|
|
(43.5
|
)
|
|
(156.3
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
4,070.0
|
|
|
$
|
3,021.7
|
|
|
$
|
435.5
|
|
|
$
|
—
|
|
|
$
|
7,527.2
|
|
Income (loss) from operations
|
|
256.3
|
|
|
189.2
|
|
|
13.2
|
|
|
(79.0
|
)
|
|
379.7
|
|
|||||
Depreciation and amortization expense
|
|
(73.1
|
)
|
|
(33.0
|
)
|
|
(7.0
|
)
|
|
(46.0
|
)
|
|
(159.1
|
)
|
12.
|
Supplemental Guarantor Information
|
Condensed Consolidating Balance Sheet
|
|||||||||||||||||||||||||||
September 30, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
329.4
|
|
|
$
|
—
|
|
|
$
|
27.7
|
|
|
$
|
—
|
|
|
$
|
(6.9
|
)
|
|
$
|
350.2
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
1,255.6
|
|
|
55.0
|
|
|
—
|
|
|
—
|
|
|
1,310.6
|
|
|||||||
Merchandise inventory
|
—
|
|
|
—
|
|
|
351.1
|
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
353.8
|
|
|||||||
Miscellaneous receivables
|
—
|
|
|
78.2
|
|
|
111.8
|
|
|
7.1
|
|
|
—
|
|
|
—
|
|
|
197.1
|
|
|||||||
Deferred income taxes
|
—
|
|
|
8.5
|
|
|
2.5
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
10.9
|
|
|||||||
Prepaid expenses and other
|
—
|
|
|
14.2
|
|
|
48.3
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
63.1
|
|
|||||||
Total current assets
|
—
|
|
|
430.3
|
|
|
1,769.3
|
|
|
93.0
|
|
|
—
|
|
|
(6.9
|
)
|
|
2,285.7
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and equipment, net
|
—
|
|
|
68.4
|
|
|
59.2
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
129.6
|
|
|||||||
Goodwill
|
—
|
|
|
752.1
|
|
|
1,440.4
|
|
|
30.4
|
|
|
—
|
|
|
—
|
|
|
2,222.9
|
|
|||||||
Other intangible assets, net
|
—
|
|
|
340.7
|
|
|
1,017.6
|
|
|
7.2
|
|
|
—
|
|
|
—
|
|
|
1,365.5
|
|
|||||||
Deferred financing costs, net
|
—
|
|
|
33.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33.7
|
|
|||||||
Other assets
|
5.0
|
|
|
1.5
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
(5.7
|
)
|
|
1.4
|
|
|||||||
Investment from and advances to subsidiaries
|
654.8
|
|
|
2,877.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,532.1
|
)
|
|
—
|
|
|||||||
Total assets
|
$
|
659.8
|
|
|
$
|
4,504.0
|
|
|
$
|
4,286.5
|
|
|
$
|
133.2
|
|
|
$
|
—
|
|
|
$
|
(3,544.7
|
)
|
|
$
|
6,038.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable—trade
|
$
|
—
|
|
|
$
|
21.4
|
|
|
$
|
635.0
|
|
|
$
|
23.1
|
|
|
$
|
—
|
|
|
$
|
(6.9
|
)
|
|
$
|
672.6
|
|
Accounts payable—inventory financing
|
—
|
|
|
—
|
|
|
225.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
225.2
|
|
|||||||
Current maturities of long-term debt
|
—
|
|
|
170.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
170.4
|
|
|||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
81.9
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
82.5
|
|
|||||||
Accrued expenses
|
—
|
|
|
183.8
|
|
|
155.0
|
|
|
7.0
|
|
|
—
|
|
|
—
|
|
|
345.8
|
|
|||||||
Total current liabilities
|
—
|
|
|
375.6
|
|
|
1,097.1
|
|
|
30.7
|
|
|
—
|
|
|
(6.9
|
)
|
|
1,496.5
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Debt
|
—
|
|
|
3,239.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,239.7
|
|
|||||||
Deferred income taxes
|
—
|
|
|
194.9
|
|
|
407.8
|
|
|
1.7
|
|
|
—
|
|
|
(5.0
|
)
|
|
599.4
|
|
|||||||
Accrued interest
|
—
|
|
|
2.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.5
|
|
|||||||
Other liabilities
|
—
|
|
|
36.5
|
|
|
3.6
|
|
|
1.5
|
|
|
—
|
|
|
(0.7
|
)
|
|
40.9
|
|
|||||||
Total long-term liabilities
|
—
|
|
|
3,473.6
|
|
|
411.4
|
|
|
3.2
|
|
|
—
|
|
|
(5.7
|
)
|
|
3,882.5
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total shareholders’ equity
|
659.8
|
|
|
654.8
|
|
|
2,778.0
|
|
|
99.3
|
|
|
—
|
|
|
(3,532.1
|
)
|
|
659.8
|
|
|||||||
Total liabilities and shareholders’ equity
|
$
|
659.8
|
|
|
$
|
4,504.0
|
|
|
$
|
4,286.5
|
|
|
$
|
133.2
|
|
|
$
|
—
|
|
|
$
|
(3,544.7
|
)
|
|
$
|
6,038.8
|
|
Condensed Consolidating Balance Sheet
|
|||||||||||||||||||||||||||
December 31, 2012
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
48.0
|
|
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
(19.9
|
)
|
|
$
|
37.9
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
1,217.7
|
|
|
67.3
|
|
|
—
|
|
|
—
|
|
|
1,285.0
|
|
|||||||
Merchandise inventory
|
—
|
|
|
—
|
|
|
313.2
|
|
|
1.4
|
|
|
—
|
|
|
—
|
|
|
314.6
|
|
|||||||
Miscellaneous receivables
|
—
|
|
|
61.7
|
|
|
82.0
|
|
|
4.8
|
|
|
—
|
|
|
—
|
|
|
148.5
|
|
|||||||
Deferred income taxes
|
—
|
|
|
8.7
|
|
|
5.5
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
14.1
|
|
|||||||
Prepaid expenses and other
|
—
|
|
|
10.1
|
|
|
24.4
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
34.6
|
|
|||||||
Total current assets
|
—
|
|
|
128.5
|
|
|
1,642.8
|
|
|
83.3
|
|
|
—
|
|
|
(19.9
|
)
|
|
1,834.7
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and equipment, net
|
—
|
|
|
73.9
|
|
|
66.2
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
142.7
|
|
|||||||
Goodwill
|
—
|
|
|
749.4
|
|
|
1,428.5
|
|
|
31.4
|
|
|
—
|
|
|
—
|
|
|
2,209.3
|
|
|||||||
Other intangible assets, net
|
—
|
|
|
348.6
|
|
|
1,121.7
|
|
|
8.2
|
|
|
—
|
|
|
—
|
|
|
1,478.5
|
|
|||||||
Deferred financing costs, net
|
—
|
|
|
53.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53.2
|
|
|||||||
Other assets
|
5.4
|
|
|
1.1
|
|
|
0.4
|
|
|
0.6
|
|
|
—
|
|
|
(5.9
|
)
|
|
1.6
|
|
|||||||
Investment in and advances to subsidiaries
|
131.1
|
|
|
2,946.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,077.1
|
)
|
|
—
|
|
|||||||
Total assets
|
$
|
136.5
|
|
|
$
|
4,300.7
|
|
|
$
|
4,259.6
|
|
|
$
|
126.1
|
|
|
$
|
—
|
|
|
$
|
(3,102.9
|
)
|
|
$
|
5,720.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable—trade
|
$
|
—
|
|
|
$
|
16.5
|
|
|
$
|
500.3
|
|
|
$
|
21.7
|
|
|
$
|
—
|
|
|
$
|
(19.9
|
)
|
|
$
|
518.6
|
|
Accounts payable—inventory financing
|
—
|
|
|
—
|
|
|
249.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
249.2
|
|
|||||||
Current maturities of long-term debt
|
—
|
|
|
40.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40.0
|
|
|||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
57.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57.8
|
|
|||||||
Accrued expenses
|
—
|
|
|
139.3
|
|
|
157.4
|
|
|
5.9
|
|
|
—
|
|
|
—
|
|
|
302.6
|
|
|||||||
Total current liabilities
|
—
|
|
|
195.8
|
|
|
964.7
|
|
|
27.6
|
|
|
—
|
|
|
(19.9
|
)
|
|
1,168.2
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Debt
|
—
|
|
|
3,731.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,731.0
|
|
|||||||
Deferred income taxes
|
—
|
|
|
188.1
|
|
|
440.0
|
|
|
1.7
|
|
|
—
|
|
|
(5.5
|
)
|
|
624.3
|
|
|||||||
Accrued interest
|
—
|
|
|
8.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.0
|
|
|||||||
Other liabilities
|
—
|
|
|
46.7
|
|
|
4.0
|
|
|
1.7
|
|
|
—
|
|
|
(0.4
|
)
|
|
52.0
|
|
|||||||
Total long-term liabilities
|
—
|
|
|
3,973.8
|
|
|
444.0
|
|
|
3.4
|
|
|
—
|
|
|
(5.9
|
)
|
|
4,415.3
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total shareholders’ equity
|
136.5
|
|
|
131.1
|
|
|
2,850.9
|
|
|
95.1
|
|
|
—
|
|
|
(3,077.1
|
)
|
|
136.5
|
|
|||||||
Total liabilities and shareholders' equity
|
$
|
136.5
|
|
|
$
|
4,300.7
|
|
|
$
|
4,259.6
|
|
|
$
|
126.1
|
|
|
$
|
—
|
|
|
$
|
(3,102.9
|
)
|
|
$
|
5,720.0
|
|
Consolidating Statement of Operations
|
|||||||||||||||||||||||||||
Three Months Ended September 30, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,753.4
|
|
|
$
|
110.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,864.3
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
2,309.0
|
|
|
96.9
|
|
|
—
|
|
|
—
|
|
|
2,405.9
|
|
|||||||
Gross profit
|
—
|
|
|
—
|
|
|
444.4
|
|
|
14.0
|
|
|
—
|
|
|
—
|
|
|
458.4
|
|
|||||||
Selling and administrative expenses
|
24.4
|
|
|
20.6
|
|
|
278.6
|
|
|
8.8
|
|
|
—
|
|
|
—
|
|
|
332.4
|
|
|||||||
Advertising expense
|
—
|
|
|
—
|
|
|
31.9
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
33.1
|
|
|||||||
(Loss) income from operations
|
(24.4
|
)
|
|
(20.6
|
)
|
|
133.9
|
|
|
4.0
|
|
|
—
|
|
|
—
|
|
|
92.9
|
|
|||||||
Interest (expense) income, net
|
—
|
|
|
(56.4
|
)
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56.2
|
)
|
|||||||
Net loss on extinguishments of long-term debt
|
—
|
|
|
(41.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41.3
|
)
|
|||||||
Management fee
|
—
|
|
|
1.0
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other (expense) income, net
|
—
|
|
|
(0.4
|
)
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|||||||
(Loss) income before income taxes
|
(24.4
|
)
|
|
(117.7
|
)
|
|
134.3
|
|
|
3.0
|
|
|
—
|
|
|
—
|
|
|
(4.8
|
)
|
|||||||
Income tax benefit (expense)
|
9.2
|
|
|
43.6
|
|
|
(49.4
|
)
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|||||||
(Loss) income before equity in earnings of subsidiaries
|
(15.2
|
)
|
|
(74.1
|
)
|
|
84.9
|
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
(2.2
|
)
|
|||||||
Equity in earnings of subsidiaries
|
13.0
|
|
|
87.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100.1
|
)
|
|
—
|
|
|||||||
Net (loss) income
|
$
|
(2.2
|
)
|
|
$
|
13.0
|
|
|
$
|
84.9
|
|
|
$
|
2.2
|
|
|
$
|
—
|
|
|
$
|
(100.1
|
)
|
|
$
|
(2.2
|
)
|
Consolidating Statement of Operations
|
|||||||||||||||||||||||||||
Three Months Ended September 30, 2012
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,515.6
|
|
|
$
|
107.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,623.3
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
2,096.9
|
|
|
93.7
|
|
|
—
|
|
|
—
|
|
|
2,190.6
|
|
|||||||
Gross profit
|
—
|
|
|
—
|
|
|
418.7
|
|
|
14.0
|
|
|
—
|
|
|
—
|
|
|
432.7
|
|
|||||||
Selling and administrative expenses
|
—
|
|
|
26.2
|
|
|
222.5
|
|
|
8.3
|
|
|
—
|
|
|
—
|
|
|
257.0
|
|
|||||||
Advertising expense
|
—
|
|
|
—
|
|
|
35.0
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
36.0
|
|
|||||||
(Loss) income from operations
|
—
|
|
|
(26.2
|
)
|
|
161.2
|
|
|
4.7
|
|
|
—
|
|
|
—
|
|
|
139.7
|
|
|||||||
Interest (expense) income, net
|
—
|
|
|
(76.8
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(76.7
|
)
|
|||||||
Management fee
|
—
|
|
|
0.8
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other income, net
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|||||||
(Loss) income before income taxes
|
—
|
|
|
(102.2
|
)
|
|
161.4
|
|
|
4.0
|
|
|
—
|
|
|
—
|
|
|
63.2
|
|
|||||||
Income tax benefit (expense)
|
—
|
|
|
34.2
|
|
|
(58.3
|
)
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
(25.2
|
)
|
|||||||
(Loss) income before equity in earnings of subsidiaries
|
—
|
|
|
(68.0
|
)
|
|
103.1
|
|
|
2.9
|
|
|
—
|
|
|
—
|
|
|
38.0
|
|
|||||||
Equity in earnings of subsidiaries
|
38.0
|
|
|
106.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(144.0
|
)
|
|
—
|
|
|||||||
Net income
|
$
|
38.0
|
|
|
$
|
38.0
|
|
|
$
|
103.1
|
|
|
$
|
2.9
|
|
|
$
|
—
|
|
|
$
|
(144.0
|
)
|
|
$
|
38.0
|
|
Consolidating Statement of Operations
|
|||||||||||||||||||||||||||
Nine Months Ended September 30, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,705.2
|
|
|
$
|
350.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,055.3
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
6,436.5
|
|
|
306.8
|
|
|
—
|
|
|
—
|
|
|
6,743.3
|
|
|||||||
Gross profit
|
—
|
|
|
—
|
|
|
1,268.7
|
|
|
43.3
|
|
|
—
|
|
|
—
|
|
|
1,312.0
|
|
|||||||
Selling and administrative expenses
|
24.4
|
|
|
73.9
|
|
|
725.4
|
|
|
26.6
|
|
|
—
|
|
|
—
|
|
|
850.3
|
|
|||||||
Advertising expense
|
—
|
|
|
—
|
|
|
92.0
|
|
|
3.1
|
|
|
—
|
|
|
—
|
|
|
95.1
|
|
|||||||
(Loss) income from operations
|
(24.4
|
)
|
|
(73.9
|
)
|
|
451.3
|
|
|
13.6
|
|
|
—
|
|
|
—
|
|
|
366.6
|
|
|||||||
Interest (expense) income, net
|
—
|
|
|
(199.0
|
)
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
(198.6
|
)
|
|||||||
Net loss on extinguishments of long-term debt
|
—
|
|
|
(55.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55.5
|
)
|
|||||||
Management fee
|
—
|
|
|
3.4
|
|
|
—
|
|
|
(3.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other (expense) income, net
|
—
|
|
|
(0.5
|
)
|
|
0.6
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|||||||
(Loss) income before income taxes
|
(24.4
|
)
|
|
(325.5
|
)
|
|
452.1
|
|
|
10.7
|
|
|
—
|
|
|
—
|
|
|
112.9
|
|
|||||||
Income tax benefit (expense)
|
9.2
|
|
|
121.0
|
|
|
(167.8
|
)
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
|
(40.1
|
)
|
|||||||
(Loss) income before equity in earnings of subsidiaries
|
(15.2
|
)
|
|
(204.5
|
)
|
|
284.3
|
|
|
8.2
|
|
|
—
|
|
|
—
|
|
|
72.8
|
|
|||||||
Equity in earnings of subsidiaries
|
88.0
|
|
|
292.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(380.5
|
)
|
|
—
|
|
|||||||
Net income
|
$
|
72.8
|
|
|
$
|
88.0
|
|
|
$
|
284.3
|
|
|
$
|
8.2
|
|
|
$
|
—
|
|
|
$
|
(380.5
|
)
|
|
$
|
72.8
|
|
Consolidating Statement of Operations
|
|||||||||||||||||||||||||||
Nine Months Ended September 30, 2012
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,200.5
|
|
|
$
|
326.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,527.2
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
5,998.1
|
|
|
284.9
|
|
|
—
|
|
|
—
|
|
|
6,283.0
|
|
|||||||
Gross profit
|
—
|
|
|
—
|
|
|
1,202.4
|
|
|
41.8
|
|
|
—
|
|
|
—
|
|
|
1,244.2
|
|
|||||||
Selling and administrative expenses
|
—
|
|
|
79.0
|
|
|
663.8
|
|
|
25.3
|
|
|
—
|
|
|
—
|
|
|
768.1
|
|
|||||||
Advertising expense
|
—
|
|
|
—
|
|
|
93.5
|
|
|
2.9
|
|
|
—
|
|
|
—
|
|
|
96.4
|
|
|||||||
(Loss) income from operations
|
—
|
|
|
(79.0
|
)
|
|
445.1
|
|
|
13.6
|
|
|
—
|
|
|
—
|
|
|
379.7
|
|
|||||||
Interest (expense) income, net
|
—
|
|
|
(232.9
|
)
|
|
0.3
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(232.5
|
)
|
|||||||
Net loss on extinguishments of long-term debt
|
—
|
|
|
(9.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.4
|
)
|
|||||||
Management fee
|
—
|
|
|
3.0
|
|
|
—
|
|
|
(3.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other (expense) income, net
|
—
|
|
|
(0.1
|
)
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|||||||
(Loss) income before income taxes
|
—
|
|
|
(318.4
|
)
|
|
445.7
|
|
|
10.7
|
|
|
—
|
|
|
—
|
|
|
138.0
|
|
|||||||
Income tax benefit (expense)
|
—
|
|
|
124.0
|
|
|
(173.4
|
)
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
(52.3
|
)
|
|||||||
(Loss) income before equity in earnings of subsidiaries
|
—
|
|
|
(194.4
|
)
|
|
272.3
|
|
|
7.8
|
|
|
—
|
|
|
—
|
|
|
85.7
|
|
|||||||
Equity in earnings of subsidiaries
|
85.7
|
|
|
280.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(365.8
|
)
|
|
—
|
|
|||||||
Net income
|
$
|
85.7
|
|
|
$
|
85.7
|
|
|
$
|
272.3
|
|
|
$
|
7.8
|
|
|
$
|
—
|
|
|
$
|
(365.8
|
)
|
|
$
|
85.7
|
|
Condensed Consolidating Statement of Comprehensive (Loss) Income
|
|||||||||||||||||||||||||||
Three Months Ended September 30, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Comprehensive (loss) income
|
$
|
(0.2
|
)
|
|
$
|
15.0
|
|
|
$
|
84.9
|
|
|
$
|
4.2
|
|
|
$
|
—
|
|
|
$
|
(104.1
|
)
|
|
$
|
(0.2
|
)
|
Condensed Consolidating Statement of Comprehensive Income
|
|||||||||||||||||||||||||||
Three Months Ended September 30, 2012
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Comprehensive income
|
$
|
41.1
|
|
|
$
|
41.1
|
|
|
$
|
103.1
|
|
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
(150.2
|
)
|
|
$
|
41.1
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|||||||||||||||||||||||||||
Nine Months Ended September 30, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Comprehensive income
|
$
|
69.1
|
|
|
$
|
84.2
|
|
|
$
|
284.3
|
|
|
$
|
4.5
|
|
|
$
|
—
|
|
|
$
|
(373.0
|
)
|
|
$
|
69.1
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|||||||||||||||||||||||||||
Nine Months Ended September 30, 2012
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Comprehensive income
|
$
|
89.1
|
|
|
$
|
89.1
|
|
|
$
|
272.3
|
|
|
$
|
11.2
|
|
|
$
|
—
|
|
|
$
|
(372.6
|
)
|
|
$
|
89.1
|
|
Condensed Consolidating Statement of Cash Flows
|
|||||||||||||||||||||||||||
Nine Months Ended September 30, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net cash (used in) provided by operating activities
|
$
|
(15.2
|
)
|
|
$
|
(71.5
|
)
|
|
$
|
425.5
|
|
|
$
|
19.0
|
|
|
$
|
—
|
|
|
$
|
13.0
|
|
|
$
|
370.8
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Capital expenditures
|
—
|
|
|
(27.2
|
)
|
|
(3.2
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(30.5
|
)
|
|||||||
Net cash used in investing activities
|
—
|
|
|
(27.2
|
)
|
|
(3.2
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(30.5
|
)
|
|||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Proceeds from borrowings under revolving credit facility
|
—
|
|
|
63.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63.0
|
|
|||||||
Repayments of borrowings under revolving credit facility
|
—
|
|
|
(63.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63.0
|
)
|
|||||||
Repayments of long-term debt
|
—
|
|
|
(47.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47.2
|
)
|
|||||||
Proceeds from issuance of long-term debt
|
—
|
|
|
1,535.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,535.2
|
|
|||||||
Payments to extinguish long-term debt
|
—
|
|
|
(1,885.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,885.9
|
)
|
|||||||
Net change in accounts payable-inventory financing
|
—
|
|
|
—
|
|
|
(24.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24.0
|
)
|
|||||||
Payment of incentive compensation plan withholding taxes
|
—
|
|
|
(4.0
|
)
|
|
(19.6
|
)
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(24.1
|
)
|
|||||||
Net proceeds from issuance of common shares
|
424.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424.7
|
|
|||||||
Advances (to) from affiliates
|
(409.5
|
)
|
|
788.1
|
|
|
(378.7
|
)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other financing activities
|
—
|
|
|
(6.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.1
|
)
|
|||||||
Net cash provided by (used in) financing activities
|
15.2
|
|
|
380.1
|
|
|
(422.3
|
)
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
(27.4
|
)
|
|||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|||||||
Net increase in cash and cash equivalents
|
—
|
|
|
281.4
|
|
|
—
|
|
|
17.9
|
|
|
—
|
|
|
13.0
|
|
|
312.3
|
|
|||||||
Cash and cash equivalents—beginning of period
|
—
|
|
|
48.0
|
|
|
—
|
|
|
9.8
|
|
|
—
|
|
|
(19.9
|
)
|
|
37.9
|
|
|||||||
Cash and cash equivalents—end of period
|
$
|
—
|
|
|
$
|
329.4
|
|
|
$
|
—
|
|
|
$
|
27.7
|
|
|
$
|
—
|
|
|
$
|
(6.9
|
)
|
|
$
|
350.2
|
|
Condensed Consolidating Statement of Cash Flows
|
|||||||||||||||||||||||||||
Nine Months Ended September 30, 2012
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
(123.7
|
)
|
|
$
|
475.3
|
|
|
$
|
13.9
|
|
|
$
|
—
|
|
|
$
|
1.6
|
|
|
$
|
367.1
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Capital expenditures
|
—
|
|
|
(14.2
|
)
|
|
(10.7
|
)
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(25.4
|
)
|
|||||||
Net cash used in investing activities
|
—
|
|
|
(14.2
|
)
|
|
(10.7
|
)
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(25.4
|
)
|
|||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Proceeds from borrowings under revolving credit facility
|
—
|
|
|
256.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256.0
|
|
|||||||
Repayments of borrowings under revolving credit facility
|
—
|
|
|
(256.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(256.0
|
)
|
|||||||
Repayments of long-term debt
|
—
|
|
|
(201.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(201.0
|
)
|
|||||||
Proceeds from issuance of long-term debt
|
—
|
|
|
135.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135.7
|
|
|||||||
Payments to extinguish long-term debt
|
—
|
|
|
(136.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(136.9
|
)
|
|||||||
Net change in accounts payable-inventory financing
|
—
|
|
|
—
|
|
|
(44.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44.6
|
)
|
|||||||
Advances from (to) affiliates
|
—
|
|
|
409.0
|
|
|
(409.3
|
)
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other financing activities
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.5
|
)
|
|||||||
Net cash provided by (used in) financing activities
|
—
|
|
|
204.3
|
|
|
(453.9
|
)
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
(249.3
|
)
|
|||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|||||||
Net increase in cash and cash equivalents
|
—
|
|
|
66.4
|
|
|
10.7
|
|
|
14.4
|
|
|
—
|
|
|
1.6
|
|
|
93.1
|
|
|||||||
Cash and cash equivalents—beginning of period
|
—
|
|
|
102.1
|
|
|
15.8
|
|
|
8.1
|
|
|
—
|
|
|
(26.1
|
)
|
|
99.9
|
|
|||||||
Cash and cash equivalents—end of period
|
$
|
—
|
|
|
$
|
168.5
|
|
|
$
|
26.5
|
|
|
$
|
22.5
|
|
|
$
|
—
|
|
|
$
|
(24.5
|
)
|
|
$
|
193.0
|
|
13.
|
Subsequent Events
|
•
|
Our Public segment sales are impacted by government spending policies, budget priorities and revenue levels. An adverse change in any of these factors could cause our Public segment customers to reduce their purchases or to terminate or not renew contracts with us, which could adversely affect our business, results of operations or cash flows. Although our sales to the federal government are diversified across multiple agencies and departments, they collectively accounted for a
pproximately 10%, 10% and 11% of our net sales for the years ended December 31, 2012, 2011 and 2010, respectively. The recent federal government shutdown impacted approximately 25% of fourth quarter selling days. While its ultimate impacts are uncertain, the federal government shutdown will likely have a negative impact on fourth quarter Public segment results.
|
•
|
An important factor affecting our ability to generate sales and achieve our targeted operating results is the impact of general economic conditions on our customers’ willingness to spend on information technology. In the second quarter of 2012, we began to see customers take a more cautious approach to spending as increased macroeconomic uncertainty impacted decision-making and led to some customers delaying purchases. While we are beginning to see improvements in operating results for certain sales channels, we will continue to closely monitor macroeconomic conditions for the remainder of 2013. Uncertainties related to the potential impacts of the federal government shutdown and budget negotiations, potential changes in tax and regulatory policy, weakening consumer and business confidence or increased unemployment could result in reduced or deferred spending on information technology products and services by our customers and result in increased competitive pricing pressures.
|
•
|
We believe that our customers’ transition to more complex technology solutions will continue to be an important growth area for us in the future. However, because the market for technology products and services is highly competitive, our success at capitalizing on this transition will be based on our ability to tailor specific solutions to customer needs, the quality and breadth of our product and service offerings, the knowledge and expertise of our sales force, price, product availability and speed of delivery.
|
(dollars in millions)
|
Three months ended September 30,
|
||||||
|
2013
|
|
2012
|
||||
Net sales
|
$
|
2,864.3
|
|
|
$
|
2,623.3
|
|
Gross profit
|
458.4
|
|
|
432.7
|
|
||
Income from operations
|
92.9
|
|
|
139.7
|
|
||
Net (loss) income
|
(2.2
|
)
|
|
38.0
|
|
||
Non-GAAP net income
|
85.2
|
|
|
68.9
|
|
||
Adjusted EBITDA
|
216.1
|
|
|
204.6
|
|
||
Average daily sales
|
44.8
|
|
|
41.6
|
|
||
Net debt (defined as total debt minus cash and cash equivalents)
|
3,059.9
|
|
|
3,678.2
|
|
||
Cash conversion cycle (in days)
|
21
|
|
|
22
|
|
|
|
Three Months Ended
September 30, 2013
|
|
Three Months Ended
September 30, 2012
|
||||||||||
|
|
Dollars in
Millions
|
|
Percentage of
Net Sales
|
|
Dollars in
Millions
|
|
Percentage of
Net Sales
|
||||||
Net sales
|
|
$
|
2,864.3
|
|
|
100.0
|
%
|
|
$
|
2,623.3
|
|
|
100.0
|
%
|
Cost of sales
|
|
2,405.9
|
|
|
84.0
|
|
|
2,190.6
|
|
|
83.5
|
|
||
Gross profit
|
|
458.4
|
|
|
16.0
|
|
|
432.7
|
|
|
16.5
|
|
||
Selling and administrative expenses
|
|
332.4
|
|
|
11.6
|
|
|
257.0
|
|
|
9.8
|
|
||
Advertising expense
|
|
33.1
|
|
|
1.2
|
|
|
36.0
|
|
|
1.4
|
|
||
Income from operations
|
|
92.9
|
|
|
3.2
|
|
|
139.7
|
|
|
5.3
|
|
||
Interest expense, net
|
|
(56.2
|
)
|
|
(2.0
|
)
|
|
(76.7
|
)
|
|
(2.9
|
)
|
||
Net loss on extinguishments of long-term debt
|
|
(41.3
|
)
|
|
(1.4
|
)
|
|
—
|
|
|
—
|
|
||
Other (expense) income, net
|
|
(0.2
|
)
|
|
—
|
|
|
0.2
|
|
|
—
|
|
||
(Loss) income before income taxes
|
|
(4.8
|
)
|
|
(0.2
|
)
|
|
63.2
|
|
|
2.4
|
|
||
Income tax benefit (expense)
|
|
2.6
|
|
|
0.1
|
|
|
(25.2
|
)
|
|
(1.0
|
)
|
||
Net (loss) income
|
|
$
|
(2.2
|
)
|
|
(0.1
|
)%
|
|
$
|
38.0
|
|
|
1.4
|
%
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2013
|
|
2012
|
|
|
|
|
|||||||||||||
(dollars in millions)
|
Net Sales
|
|
Percentage
of Total Net Sales
|
|
Net Sales
|
|
Percentage
of Total Net Sales
|
|
Dollar
Change
|
|
Percent
Change
(1)
|
|||||||||
Corporate
|
$
|
1,465.8
|
|
|
51.2
|
%
|
|
$
|
1,312.8
|
|
|
50.0
|
%
|
|
$
|
153.0
|
|
|
11.7
|
%
|
Public
|
1,244.6
|
|
|
43.5
|
|
|
1,163.7
|
|
|
44.4
|
|
|
80.9
|
|
|
6.9
|
|
|||
Other
|
153.9
|
|
|
5.3
|
|
|
146.8
|
|
|
5.6
|
|
|
7.1
|
|
|
4.8
|
|
|||
Total net sales
|
$
|
2,864.3
|
|
|
100.0
|
%
|
|
$
|
2,623.3
|
|
|
100.0
|
%
|
|
$
|
241.0
|
|
|
9.2
|
%
|
(dollars in millions)
|
|
Three Months Ended September 30,
|
|
Dollar
Change
|
|
Percent
Change
|
|||||||||
2013
|
|
2012
|
|
||||||||||||
Corporate:
|
|
|
|
|
|
|
|
|
|||||||
Medium / Large
|
|
$
|
1,203.4
|
|
|
$
|
1,055.7
|
|
|
$
|
147.7
|
|
|
14.0
|
%
|
Small Business
|
|
262.4
|
|
|
257.1
|
|
|
5.3
|
|
|
2.1
|
|
|||
Total Corporate
|
|
$
|
1,465.8
|
|
|
$
|
1,312.8
|
|
|
$
|
153.0
|
|
|
11.7
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
Public:
|
|
|
|
|
|
|
|
|
|||||||
Government
|
|
$
|
375.3
|
|
|
$
|
408.6
|
|
|
$
|
(33.3
|
)
|
|
(8.2
|
)%
|
Education
|
|
513.4
|
|
|
394.7
|
|
|
118.7
|
|
|
30.1
|
|
|||
Healthcare
|
|
355.9
|
|
|
360.4
|
|
|
(4.5
|
)
|
|
(1.2
|
)
|
|||
Total Public
|
|
$
|
1,244.6
|
|
|
$
|
1,163.7
|
|
|
$
|
80.9
|
|
|
6.9
|
%
|
•
|
Pre-tax charges of $36.7 million related to the acceleration of the expense recognition for certain equity awards and $4.0 million for the related employer payroll taxes. See Note 7 of the accompanying unaudited interim consolidated financial statements for additional discussion of the impact of the IPO on our equity awards.
|
•
|
A pre-tax charge of $24.4 million related to the payment of a termination fee to affiliates of Madison Dearborn Partners, LLC and Providence Equity Partners, L.L.C. in connection with the termination of the management services agreement with such entities.
|
•
|
A pre-tax charge of $7.5 million related to compensation expense in connection with the Restricted Debt Unit Plan. See Note 9 of the accompanying unaudited interim consolidated financial statements for additional discussion of this charge.
|
•
|
Other IPO related expenses of $1.5 million.
|
|
|
Three Months Ended
September 30, 2013
|
|
Three Months Ended
September 30, 2012
|
|
|
|||||||||||
|
|
Dollars in
Millions
|
|
Operating
Margin
Percentage
|
|
Dollars in
Millions
|
|
Operating
Margin
Percentage
|
|
Percent Change
in Income (Loss)
from Operations
|
|||||||
Segments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Corporate
|
|
$
|
63.2
|
|
|
4.3
|
%
|
|
$
|
79.2
|
|
|
6.0
|
%
|
|
(20.2
|
)%
|
Public
|
|
71.1
|
|
|
5.7
|
|
|
81.1
|
|
|
7.0
|
|
|
(12.4
|
)
|
||
Other
|
|
3.7
|
|
|
2.4
|
|
|
5.6
|
|
|
3.8
|
|
|
(34.6
|
)
|
||
Headquarters
(2)
|
|
(45.1
|
)
|
|
nm*
|
|
|
(26.2
|
)
|
|
nm*
|
|
|
72.1
|
|
||
Total income from operations
|
|
$
|
92.9
|
|
|
3.2
|
%
|
|
$
|
139.7
|
|
|
5.3
|
%
|
|
(33.5
|
)%
|
(1)
|
Segment income from operations includes the segment’s direct operating income and allocations for Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.
|
(2)
|
Includes certain Headquarters’ function costs that are not allocated to the segments.
|
(in millions)
|
|
Three Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Net (loss) income
|
|
$
|
(2.2
|
)
|
|
$
|
38.0
|
|
Amortization of intangibles
(1)
|
|
40.1
|
|
|
41.1
|
|
||
Non-cash equity-based compensation
|
|
2.3
|
|
|
6.5
|
|
||
Litigation settlement gain
|
|
(10.4
|
)
|
|
—
|
|
||
Net loss on extinguishments of long-term debt
|
|
41.3
|
|
|
—
|
|
||
Interest expense adjustment related to extinguishments of long-term debt
(2)
|
|
(4.6
|
)
|
|
—
|
|
||
IPO related expenses
(3)
|
|
74.1
|
|
|
—
|
|
||
Aggregate adjustment for income taxes
(4)
|
|
(55.4
|
)
|
|
(16.7
|
)
|
||
Non-GAAP net income
|
|
$
|
85.2
|
|
|
$
|
68.9
|
|
(1)
|
Includes amortization expense for acquisition-related intangible assets, primarily customer relationships and trade names.
|
(2)
|
Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid.
|
(3)
|
IPO related expenses consist of the following:
|
(in millions)
|
|
Three Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Acceleration charge for certain equity awards and related employer payroll taxes
|
|
$
|
40.7
|
|
|
$
|
—
|
|
RDU Plan cash retention pool accrual
|
|
7.5
|
|
|
—
|
|
||
Management services agreement termination fee
|
|
24.4
|
|
|
—
|
|
||
Other expenses
|
|
1.5
|
|
|
—
|
|
||
IPO related expenses
|
|
$
|
74.1
|
|
|
$
|
—
|
|
(4)
|
Based on a normalized effective tax rate of 39.0%.
|
(in millions)
|
|
Three Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Net (loss) income
|
|
$
|
(2.2
|
)
|
|
$
|
38.0
|
|
Depreciation and amortization
|
|
52.0
|
|
|
53.4
|
|
||
Income tax (benefit) expense
|
|
(2.6
|
)
|
|
25.2
|
|
||
Interest expense, net
|
|
56.2
|
|
|
76.7
|
|
||
EBITDA
|
|
103.4
|
|
|
193.3
|
|
||
|
|
|
|
|
||||
Adjustments:
|
|
|
|
|
||||
Non-cash equity-based compensation
|
|
2.3
|
|
|
6.5
|
|
||
Sponsor fee
|
|
—
|
|
|
1.3
|
|
||
Consulting and debt-related professional fees
|
|
—
|
|
|
0.1
|
|
||
Net loss on extinguishments of long-term debt
|
|
41.3
|
|
|
—
|
|
||
Litigation, net
|
|
(8.2
|
)
|
|
—
|
|
||
IPO related expenses
(1)
|
|
74.1
|
|
|
—
|
|
||
Other adjustments
(2)
|
|
3.2
|
|
|
3.4
|
|
||
Total adjustments
|
|
112.7
|
|
|
11.3
|
|
||
Adjusted EBITDA
|
|
$
|
216.1
|
|
|
$
|
204.6
|
|
(1)
|
As defined under
Non-GAAP net income
above.
|
(2)
|
Other adjustments primarily include certain retention costs and equity investment income.
|
|
|
Nine Months Ended
September 30, 2013
|
|
Nine Months Ended
September 30, 2012
|
||||||||||
|
|
Dollars in
Millions
|
|
Percentage of
Net Sales
|
|
Dollars in
Millions
|
|
Percentage of
Net Sales
|
||||||
Net sales
|
|
$
|
8,055.3
|
|
|
100.0
|
%
|
|
$
|
7,527.2
|
|
|
100.0
|
%
|
Cost of sales
|
|
6,743.3
|
|
|
83.7
|
|
|
6,283.0
|
|
|
83.5
|
|
||
Gross profit
|
|
1,312.0
|
|
|
16.3
|
|
|
1,244.2
|
|
|
16.5
|
|
||
Selling and administrative expenses
|
|
850.3
|
|
|
10.6
|
|
|
768.1
|
|
|
10.2
|
|
||
Advertising expense
|
|
95.1
|
|
|
1.1
|
|
|
96.4
|
|
|
1.3
|
|
||
Income from operations
|
|
366.6
|
|
|
4.6
|
|
|
379.7
|
|
|
5.0
|
|
||
Interest expense, net
|
|
(198.6
|
)
|
|
(2.5
|
)
|
|
(232.5
|
)
|
|
(3.1
|
)
|
||
Net loss on extinguishments of long-term debt
|
|
(55.5
|
)
|
|
(0.7
|
)
|
|
(9.4
|
)
|
|
(0.1
|
)
|
||
Other income, net
|
|
0.4
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
||
Income before income taxes
|
|
112.9
|
|
|
1.4
|
|
|
138.0
|
|
|
1.8
|
|
||
Income tax expense
|
|
(40.1
|
)
|
|
(0.5
|
)
|
|
(52.3
|
)
|
|
(0.7
|
)
|
||
Net income
|
|
$
|
72.8
|
|
|
0.9
|
%
|
|
$
|
85.7
|
|
|
1.1
|
%
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2013
|
|
2012
|
|
|
|
|
|||||||||||||
(dollars in millions)
|
Net Sales
|
|
Percentage
of Total Net Sales
|
|
Net Sales
|
|
Percentage
of Total Net Sales
|
|
Dollar
Change
|
|
Percent
Change
(1)
|
|||||||||
Corporate
|
$
|
4,407.1
|
|
|
54.7
|
%
|
|
$
|
4,070.0
|
|
|
54.1
|
%
|
|
$
|
337.1
|
|
|
8.3
|
%
|
Public
|
3,174.0
|
|
|
39.4
|
|
|
3,021.7
|
|
|
40.1
|
|
|
152.3
|
|
|
5.0
|
|
|||
Other
|
474.2
|
|
|
5.9
|
|
|
435.5
|
|
|
5.8
|
|
|
38.7
|
|
|
8.9
|
|
|||
Total net sales
|
$
|
8,055.3
|
|
|
100.0
|
%
|
|
$
|
7,527.2
|
|
|
100.0
|
%
|
|
$
|
528.1
|
|
|
7.0
|
%
|
(dollars in millions)
|
|
Nine Months Ended September 30,
|
|
Dollar
Change
|
|
Percent
Change
|
|||||||||
2013
|
|
2012
|
|
||||||||||||
Corporate:
|
|
|
|
|
|
|
|
|
|||||||
Medium / Large
|
|
$
|
3,621.0
|
|
|
$
|
3,270.0
|
|
|
$
|
351.0
|
|
|
10.7
|
%
|
Small Business
|
|
786.1
|
|
|
800.0
|
|
|
(13.9
|
)
|
|
(1.7
|
)
|
|||
Total Corporate
|
|
$
|
4,407.1
|
|
|
$
|
4,070.0
|
|
|
$
|
337.1
|
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
Public:
|
|
|
|
|
|
|
|
|
|||||||
Government
|
|
$
|
923.3
|
|
|
$
|
989.2
|
|
|
$
|
(65.9
|
)
|
|
(6.7
|
)%
|
Education
|
|
1,166.3
|
|
|
965.9
|
|
|
200.4
|
|
|
20.7
|
|
|||
Healthcare
|
|
1,084.4
|
|
|
1,066.6
|
|
|
17.8
|
|
|
1.7
|
|
|||
Total Public
|
|
$
|
3,174.0
|
|
|
$
|
3,021.7
|
|
|
$
|
152.3
|
|
|
5.0
|
%
|
•
|
Pre-tax charges of $36.7 million related to the acceleration of the expense recognition for certain equity awards and $4.0 million for the related employer payroll taxes. See Note 7 of the accompanying unaudited interim consolidated financial statements for additional discussion of the impact of the IPO on our equity awards.
|
•
|
A pre-tax charge of $24.4 million related to the payment of a termination fee to affiliates of Madison Dearborn Partners, LLC and Providence Equity Partners, L.L.C. in connection with the termination of the management services agreement with such entities.
|
•
|
A pre-tax charge of $7.5 million related to compensation expense in connection with the Restricted Debt Unit Plan. See Note 9 of the accompanying unaudited interim consolidated financial statements for additional discussion of this charge.
|
•
|
Other IPO related expenses of $1.7 million.
|
|
|
Nine Months Ended
September 30, 2013
|
|
Nine Months Ended
September 30, 2012
|
|
|
|||||||||||
|
|
Dollars in
Millions
|
|
Operating
Margin
Percentage
|
|
Dollars in
Millions
|
|
Operating
Margin
Percentage
|
|
Percent Change
in Income (Loss)
from Operations
|
|||||||
Segments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Corporate
|
|
$
|
260.5
|
|
|
5.9
|
%
|
|
$
|
256.3
|
|
|
6.3
|
%
|
|
1.6
|
%
|
Public
|
|
185.8
|
|
|
5.9
|
|
|
189.2
|
|
|
6.3
|
|
|
(1.8
|
)
|
||
Other
|
|
18.6
|
|
|
3.9
|
|
|
13.2
|
|
|
3.0
|
|
|
42.1
|
|
||
Headquarters
(2)
|
|
(98.3
|
)
|
|
nm*
|
|
|
(79.0
|
)
|
|
nm*
|
|
|
(24.5
|
)
|
||
Total income from operations
|
|
$
|
366.6
|
|
|
4.6
|
%
|
|
$
|
379.7
|
|
|
5.0
|
%
|
|
(3.5
|
)%
|
(1)
|
Segment income from operations includes the segment’s direct operating income and allocations for Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.
|
(2)
|
Includes certain Headquarters’ function costs that are not allocated to the segments.
|
(in millions)
|
|
Nine Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Net income
|
|
$
|
72.8
|
|
|
$
|
85.7
|
|
Amortization of intangibles
(1)
|
|
120.5
|
|
|
123.3
|
|
||
Non-cash equity-based compensation
|
|
6.4
|
|
|
18.0
|
|
||
Litigation settlement gain
|
|
(10.4
|
)
|
|
—
|
|
||
Net loss on extinguishments of long-term debt
|
|
55.5
|
|
|
9.4
|
|
||
Interest expense adjustment related to extinguishments of long-term debt
(2)
|
|
(5.4
|
)
|
|
(1.7
|
)
|
||
IPO related expenses
(3)
|
|
74.3
|
|
|
—
|
|
||
Aggregate adjustment for income taxes
(4)
|
|
(93.0
|
)
|
|
(52.7
|
)
|
||
Non-GAAP net income
|
|
$
|
220.7
|
|
|
$
|
182.0
|
|
(1)
|
Includes amortization expense for acquisition-related intangible assets, primarily customer relationships and trade names.
|
(2)
|
Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid.
|
(3)
|
IPO related expenses consist of the following:
|
(in millions)
|
|
Nine Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Acceleration charge for certain equity awards and related employer payroll taxes
|
|
$
|
40.7
|
|
|
$
|
—
|
|
RDU Plan cash retention pool accrual
|
|
7.5
|
|
|
—
|
|
||
Management services agreement termination fee
|
|
24.4
|
|
|
—
|
|
||
Other expenses
|
|
1.7
|
|
|
—
|
|
||
IPO related expenses
|
|
$
|
74.3
|
|
|
$
|
—
|
|
(4)
|
Based on a normalized effective tax rate of 39.0%.
|
(in millions)
|
|
Nine Months Ended September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Net income
|
|
$
|
72.8
|
|
|
$
|
85.7
|
|
Depreciation and amortization
|
|
156.3
|
|
|
159.1
|
|
||
Income tax expense
|
|
40.1
|
|
|
52.3
|
|
||
Interest expense, net
|
|
198.6
|
|
|
232.5
|
|
||
EBITDA
|
|
467.8
|
|
|
529.6
|
|
||
|
|
|
|
|
||||
Adjustments:
|
|
|
|
|
||||
Non-cash equity-based compensation
|
|
6.4
|
|
|
18.0
|
|
||
Sponsor fee
|
|
2.5
|
|
|
3.8
|
|
||
Consulting and debt-related professional fees
|
|
0.1
|
|
|
0.6
|
|
||
Net loss on extinguishments of long-term debt
|
|
55.5
|
|
|
9.4
|
|
||
Litigation, net
|
|
(8.2
|
)
|
|
—
|
|
||
IPO related expenses
(1)
|
|
74.3
|
|
|
—
|
|
||
Other adjustments
(2)
|
|
8.9
|
|
|
10.2
|
|
||
Total adjustments
|
|
139.5
|
|
|
42.0
|
|
||
Adjusted EBITDA
|
|
$
|
607.3
|
|
|
$
|
571.6
|
|
(1)
|
As defined under
Non-GAAP net income
above.
|
(2)
|
Other adjustments primarily include certain retention costs and equity investment income.
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
|
2013
|
|
2012
|
||||
EBITDA
|
|
$
|
467.8
|
|
|
$
|
529.6
|
|
Depreciation and amortization
|
|
(156.3
|
)
|
|
(159.1
|
)
|
||
Income tax expense
|
|
(40.1
|
)
|
|
(52.3
|
)
|
||
Interest expense, net
|
|
(198.6
|
)
|
|
(232.5
|
)
|
||
Net income
|
|
72.8
|
|
|
85.7
|
|
||
Depreciation and amortization
|
|
156.3
|
|
|
159.1
|
|
||
Equity-based compensation expense
|
|
44.3
|
|
|
18.0
|
|
||
Deferred income taxes
|
|
(21.3
|
)
|
|
(48.1
|
)
|
||
Amortization of deferred financing costs and debt premium
|
|
7.1
|
|
|
10.8
|
|
||
Net loss on extinguishments of long-term debt
|
|
55.5
|
|
|
9.4
|
|
||
Other
|
|
0.1
|
|
|
0.9
|
|
||
Changes in assets and liabilities
|
|
56.0
|
|
|
131.3
|
|
||
Net cash provided by operating activities
|
|
$
|
370.8
|
|
|
$
|
367.1
|
|
(in millions)
|
Nine Months Ended September 30,
|
||||||
|
2013
|
|
2012
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
370.8
|
|
|
$
|
367.1
|
|
Investing activities
|
(30.5
|
)
|
|
(25.4
|
)
|
||
|
|
|
|
||||
Net change in accounts payable-inventory financing
|
(24.0
|
)
|
|
(44.6
|
)
|
||
Other cash flows from financing activities
|
(3.4
|
)
|
|
(204.7
|
)
|
||
Financing activities
|
(27.4
|
)
|
|
(249.3
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(0.6
|
)
|
|
0.7
|
|
||
Net increase in cash and cash equivalents
|
$
|
312.3
|
|
|
$
|
93.1
|
|
(in days)
|
September 30,
|
||||
|
2013
|
|
2012
|
||
Days of sales outstanding (DSO)
(1)
|
41
|
|
|
42
|
|
Days of supply in inventory (DIO)
(2)
|
15
|
|
|
14
|
|
Days of purchases outstanding (DPO)
(3)
|
(35
|
)
|
|
(34
|
)
|
Cash conversion cycle
|
21
|
|
|
22
|
|
(1)
|
Represents the rolling three month average of the balance of trade accounts receivable, net at the end of the period divided by average daily net sales for the same three-month period. Also incorporates components of other miscellaneous receivables.
|
(2)
|
Represents the rolling three month average of the balance of inventory at the end of the period divided by average daily cost of sales for the same three-month period.
|
(3)
|
Represents the rolling three month average of the combined balance of accounts payable-trade, excluding cash overdrafts, and accounts payable-inventory financing at the end of the period divided by average daily cost of sales for the same three-month period.
|
(dollars in millions)
|
|
Interest
Rate
(1)
|
|
September 30,
2013
|
|
December 31,
2012
|
|||||
Senior secured asset-based revolving credit facility
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
Senior secured term loan facility
|
|
3.5
|
%
|
|
1,532.8
|
|
|
1,339.5
|
|
||
Unamortized discount on senior secured term loan facility
|
|
|
|
(4.6
|
)
|
|
—
|
|
|||
Senior secured notes due 2018
|
|
8.0
|
%
|
|
325.0
|
|
|
500.0
|
|
||
Senior notes due 2019
|
|
8.5
|
%
|
|
1,305.0
|
|
|
1,305.0
|
|
||
Unamortized premium on senior notes due 2019
|
|
|
|
4.4
|
|
|
5.0
|
|
|||
Senior subordinated notes due 2017
|
|
12.535
|
%
|
|
247.5
|
|
|
621.5
|
|
||
Total long-term debt
|
|
|
|
3,410.1
|
|
|
3,771.0
|
|
|||
Less current maturities of long-term debt
|
|
|
|
(170.4
|
)
|
|
(40.0
|
)
|
|||
Long-term debt, excluding current maturities
|
|
|
|
$
|
3,239.7
|
|
|
$
|
3,731.0
|
|
(in millions)
|
|
September 30,
2013
|
|
December 31, 2012
|
||||
Revolving Loan inventory financing agreement
|
|
$
|
223.7
|
|
|
$
|
248.3
|
|
Other inventory financing agreements
|
|
1.5
|
|
|
0.9
|
|
||
Accounts payable-inventory financing
|
|
$
|
225.2
|
|
|
$
|
249.2
|
|
Exhibit
|
|
Description
|
10.1
|
|
Incremental Amendment, dated as of July 31, 2013, by and among CDW LLC, the lenders party thereto and Barclays Bank PLC, as administrative agent, previously filed as Exhibit 10.1 with CDW Corporation’s Form 8-K filed on July 31, 2013 and incorporated herein by reference.
|
|
|
|
10.2
|
|
Third Amendment to Term Loan Agreement, dated as of September 12, 2013, by and among CDW LLC, the lenders from time to time party thereto, and Barclays Bank PLC, as administrative agent and collateral agent.
|
|
|
|
10.3
|
|
CDW Amended and Restated Restricted Debt Unit Plan.
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
CDW CORPORATION
|
||
|
|
|
|
|
|
Date:
|
November 7, 2013
|
|
By:
|
|
/s/ Ann E. Ziegler
|
|
|
|
|
|
Ann E. Ziegler
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
|
(Duly authorized officer and principal financial officer)
|
2.1
|
Beneficiary ........................................................................2
|
2.2
|
Board .................................................................................2
|
2.3
|
Company ............................................................................2
|
2.4
|
Compensation Committee .................................................2
|
2.5
|
Debt Pool ............................................................................2
|
2.6
|
Disability ............................................................................2
|
2.7
|
Effective Date .....................................................................3
|
2.8
|
Fair Market Value ...............................................................3
|
2.9
|
First Retention Payment Date
..............................................
3
|
2.10
|
First Retention Pool..............................................................3
|
2.11
|
Interest Payment Date
..........................................................
3
|
2.12
|
IPO
.....................................................................................
4
|
2.13
|
Maximum Amount
.............................................................
4
|
2.14
|
Participant
..........................................................................
4
|
2.15
|
Payment Event
...................................................................
4
|
2.16
|
Plan
....................................................................................
4
|
2.17
|
RDU
...................................................................................
4
|
2.18
|
Replacement Assets
...........................................................
4
|
2.19
|
Reserve Pool
......................................................................
4
|
2.20
|
Sale of the Company
..........................................................
4
|
2.21
|
Second Retention Payment Date
........................................
5
|
2.22
|
Second Retention Pool
........................................................
5
|
2.23
|
Section 409A
......................................................................
5
|
2.24
|
Senior Subordinated Debt
...................................................
5
|
2.25
|
Taxes
.................................................................................
5
|
2.26
|
Third Retention Pool
...........................................................
5
|
4.1
|
Description of Principal Component
..................................
6
|
4.2
|
Payment Events ........
..........................................................
6
|
4.3
|
Payment Form ....................................................................7
|
5.1
|
Description of Interest Component.......................................7
|
5.2
|
Payment Timing .................................................................7
|
5.3
|
Payment Eligibility...............................................................8
|
5.4
|
Payment Form......................................................................9
|
8.1
|
First Retention Pool............................................................10
|
8.2
|
Second Retention Pool........................................................10
|
8.3
|
Third Retention Pool...........................................................11
|
10.1
|
Administration ................................................................11
|
10.2
|
Amendment and Termination of the Plan.............................11
|
10.3
|
Payments to Beneficiaries...................................................12
|
10.4
|
Withholding .....................................................................12
|
10.5
|
Funding ............................................................................12
|
10.6
|
Expenses .........................................................................13
|
10.7
|
No Obligation.....................................................................13
|
10.8
|
No Assignment; Resolution of Disputes.............................13
|
10.9
|
Severability .....................................................................13
|
10.10
|
Legal Document.................................................................14
|
10.11
|
Section 409A......................................................................14
|
10.12
|
Governing Law, Venue, Waiver of Jury Trial.......................14
|
(a)
|
General.
|
(b)
|
Treatment of Unissued RDUs (Reserve Pool).
|
(a)
|
October 12, 2017; or
|
(b)
|
A Sale of the Company that also is a change in control event for purposes of Section 409A;
provided, however
,
that payments due upon a Sale of the Company shall be made no later than 20 calendar days following the Sale of the Company.
|
(a)
|
General.
|
(b)
|
Reserve Pool.
|
(a)
|
General.
|
(b)
|
Reserve Pool.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CDW Corporation (the "registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
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
|
Chairman and Chief Executive Officer
|
CDW Corporation
|
November 7, 2013
|
1.
|
I have reviewed this quarterly report on Form 10-Q of CDW Corporation (the "registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
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
|
November 7, 2013
|
/s/ Thomas E. Richards
|
Thomas E. Richards
|
Chairman and Chief Executive Officer
|
CDW Corporation
|
November 7, 2013
|
/s/ Ann E. Ziegler
|
Ann E. Ziegler
|
Senior Vice President and Chief Financial Officer
|
CDW Corporation
|
November 7, 2013
|