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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.
|
||
Item 3.
|
||
Item 4.
|
||
PART II
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OTHER INFORMATION
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Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
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||
Item 5.
|
||
Item 6.
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||
SIGNATURES
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per-share amounts)
|
|||||||
|
March 31,
2014
|
|
December 31, 2013
|
||||
Assets
|
(unaudited)
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
306.7
|
|
|
$
|
188.1
|
|
Accounts receivable, net of allowance for doubtful accounts of $5.4 for both periods
|
1,335.0
|
|
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1,451.0
|
|
||
Merchandise inventory
|
388.4
|
|
|
382.0
|
|
||
Miscellaneous receivables
|
164.5
|
|
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146.3
|
|
||
Prepaid expenses and other
|
53.3
|
|
|
46.1
|
|
||
Total current assets
|
2,247.9
|
|
|
2,213.5
|
|
||
Property and equipment, net
|
129.9
|
|
|
131.1
|
|
||
Goodwill
|
2,219.1
|
|
|
2,220.3
|
|
||
Other intangible assets, net
|
1,286.6
|
|
|
1,328.0
|
|
||
Deferred financing costs, net
|
27.5
|
|
|
30.1
|
|
||
Other assets
|
1.5
|
|
|
1.6
|
|
||
Total assets
|
$
|
5,912.5
|
|
|
$
|
5,924.6
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable—trade
|
$
|
683.7
|
|
|
$
|
662.8
|
|
Accounts payable—inventory financing
|
250.2
|
|
|
256.6
|
|
||
Current maturities of long-term debt
|
15.4
|
|
|
45.4
|
|
||
Deferred revenue
|
93.6
|
|
|
94.8
|
|
||
Accrued expenses:
|
|
|
|
||||
Compensation
|
91.1
|
|
|
112.2
|
|
||
Interest
|
64.8
|
|
|
31.8
|
|
||
Sales taxes
|
29.7
|
|
|
29.2
|
|
||
Advertising
|
35.7
|
|
|
33.2
|
|
||
Income taxes
|
48.8
|
|
|
6.3
|
|
||
Other
|
105.5
|
|
|
130.3
|
|
||
Total current liabilities
|
1,418.5
|
|
|
1,402.6
|
|
||
Long-term liabilities:
|
|
|
|
||||
Debt
|
3,157.0
|
|
|
3,205.8
|
|
||
Deferred income taxes
|
540.8
|
|
|
563.5
|
|
||
Other liabilities
|
41.4
|
|
|
41.0
|
|
||
Total long-term liabilities
|
3,739.2
|
|
|
3,810.3
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred shares, $0.01 par value, 100.0 shares authorized, no shares issued or outstanding for both periods
|
—
|
|
|
—
|
|
||
Common shares, $0.01 par value, 1,000.0 shares authorized, 172.0 shares issued and outstanding for both periods
|
1.7
|
|
|
1.7
|
|
||
Paid-in capital
|
2,691.5
|
|
|
2,688.1
|
|
||
Accumulated deficit
|
(1,928.2
|
)
|
|
(1,971.8
|
)
|
||
Accumulated other comprehensive loss
|
(10.2
|
)
|
|
(6.3
|
)
|
||
Total shareholders’ equity
|
754.8
|
|
|
711.7
|
|
||
Total liabilities and shareholders’ equity
|
$
|
5,912.5
|
|
|
$
|
5,924.6
|
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(unaudited)
|
||||||||
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Three Months Ended March 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Net sales
|
|
$
|
2,652.3
|
|
|
$
|
2,411.7
|
|
Cost of sales
|
|
2,227.1
|
|
|
2,009.7
|
|
||
Gross profit
|
|
425.2
|
|
|
402.0
|
|
||
Selling and administrative expenses
|
|
260.9
|
|
|
251.5
|
|
||
Advertising expense
|
|
28.5
|
|
|
30.4
|
|
||
Income from operations
|
|
135.8
|
|
|
120.1
|
|
||
Interest expense, net
|
|
(50.1
|
)
|
|
(72.1
|
)
|
||
Net loss on extinguishments of long-term debt
|
|
(5.4
|
)
|
|
(3.9
|
)
|
||
Other income, net
|
|
0.5
|
|
|
0.4
|
|
||
Income before income taxes
|
|
80.8
|
|
|
44.5
|
|
||
Income tax expense
|
|
(29.9
|
)
|
|
(16.2
|
)
|
||
Net income
|
|
$
|
50.9
|
|
|
$
|
28.3
|
|
|
|
|
|
|
||||
Net income per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
0.30
|
|
|
$
|
0.19
|
|
Diluted
|
|
$
|
0.30
|
|
|
$
|
0.19
|
|
|
|
|
|
|
||||
Weighted-average number of common shares outstanding:
|
|
|
|
|
||||
Basic
|
|
169.6
|
|
|
145.2
|
|
||
Diluted
|
|
172.3
|
|
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146.1
|
|
||
|
|
|
|
|
||||
Cash dividends declared per common share
|
|
$
|
0.0425
|
|
|
$
|
—
|
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
|
||||||||
|
|
Three Months Ended March 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Net income
|
|
$
|
50.9
|
|
|
$
|
28.3
|
|
Foreign currency translation adjustment
|
|
(3.9
|
)
|
|
(2.4
|
)
|
||
Other comprehensive loss, net of tax
|
|
(3.9
|
)
|
|
(2.4
|
)
|
||
Comprehensive income
|
|
$
|
47.0
|
|
|
$
|
25.9
|
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in millions)
(unaudited)
|
||||||||||||||||||||||||||||||
|
|
Preferred Stock
|
|
Common Stock
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive Loss
|
|
Total
Shareholders’ Equity |
||||||||||||||
Balance at December 31, 2013
|
|
—
|
|
|
$
|
—
|
|
|
172.0
|
|
|
$
|
1.7
|
|
|
$
|
2,688.1
|
|
|
$
|
(1,971.8
|
)
|
|
$
|
(6.3
|
)
|
|
$
|
711.7
|
|
Equity-based compensation expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
||||||
Stock option exercises
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||||
Dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.3
|
)
|
|
—
|
|
|
(7.3
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50.9
|
|
|
—
|
|
|
50.9
|
|
||||||
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|
(3.9
|
)
|
||||||
Balance at March 31, 2014
|
|
—
|
|
|
$
|
—
|
|
|
172.0
|
|
|
$
|
1.7
|
|
|
$
|
2,691.5
|
|
|
$
|
(1,928.2
|
)
|
|
$
|
(10.2
|
)
|
|
$
|
754.8
|
|
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
|
||||||||
|
|
Three Months Ended March 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
50.9
|
|
|
$
|
28.3
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
52.0
|
|
|
52.0
|
|
||
Equity-based compensation expense
|
|
3.3
|
|
|
1.9
|
|
||
Deferred income taxes
|
|
(22.1
|
)
|
|
(14.1
|
)
|
||
Amortization of deferred financing costs, debt premium, and debt discount, net
|
|
1.6
|
|
|
3.0
|
|
||
Net loss on extinguishments of long-term debt
|
|
5.4
|
|
|
3.9
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
113.2
|
|
|
18.8
|
|
||
Merchandise inventory
|
|
(6.5
|
)
|
|
(43.9
|
)
|
||
Other assets
|
|
(25.7
|
)
|
|
(19.6
|
)
|
||
Accounts payable-trade
|
|
21.5
|
|
|
124.2
|
|
||
Other current liabilities
|
|
52.0
|
|
|
57.6
|
|
||
Long-term liabilities
|
|
0.7
|
|
|
(4.1
|
)
|
||
Net cash provided by operating activities
|
|
246.3
|
|
|
208.0
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Capital expenditures
|
|
(9.3
|
)
|
|
(8.8
|
)
|
||
Payment of accrued charitable contribution related to the MPK Coworker Incentive Plan II
|
|
(20.9
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
|
(30.2
|
)
|
|
(8.8
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Repayments of long-term debt
|
|
(3.9
|
)
|
|
(40.0
|
)
|
||
Payments to extinguish long-term debt
|
|
(79.5
|
)
|
|
(53.1
|
)
|
||
Net change in accounts payable-inventory financing
|
|
(6.4
|
)
|
|
3.7
|
|
||
Proceeds from stock option exercises
|
|
0.1
|
|
|
—
|
|
||
Dividends paid
|
|
(7.3
|
)
|
|
—
|
|
||
Repurchase of common shares
|
|
—
|
|
|
(0.1
|
)
|
||
Net cash used in financing activities
|
|
(97.0
|
)
|
|
(89.5
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(0.5
|
)
|
|
(0.5
|
)
|
||
Net increase in cash and cash equivalents
|
|
118.6
|
|
|
109.2
|
|
||
Cash and cash equivalents—beginning of period
|
|
188.1
|
|
|
37.9
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
306.7
|
|
|
$
|
147.1
|
|
Supplementary disclosure of cash flow information:
|
|
|
|
|
||||
Interest paid
|
|
$
|
(16.1
|
)
|
|
$
|
(16.2
|
)
|
Taxes paid, net
|
|
$
|
(9.5
|
)
|
|
$
|
(1.7
|
)
|
1.
|
Description of Business and Summary of Significant Accounting Policies
|
2.
|
Recent Accounting Pronouncements
|
3.
|
Inventory Financing Agreements
|
(in millions)
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Revolving Loan inventory financing agreement
|
|
$
|
250.1
|
|
|
$
|
256.1
|
|
Other inventory financing agreements
|
|
0.1
|
|
|
0.5
|
|
||
Accounts payable-inventory financing
|
|
$
|
250.2
|
|
|
$
|
256.6
|
|
4.
|
Long-Term Debt
|
(dollars in millions)
|
|
Interest
Rate
(1)
|
|
March 31,
2014
|
|
December 31,
2013
|
|||||
Senior secured asset-based revolving credit facility
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
Senior secured term loan facility
|
|
3.25
|
%
|
|
1,525.1
|
|
|
1,528.9
|
|
||
Unamortized discount on senior secured term loan facility
|
|
|
|
(4.2
|
)
|
|
(4.4
|
)
|
|||
Senior secured notes due 2018
|
|
8.0
|
%
|
|
325.0
|
|
|
325.0
|
|
||
Senior notes due 2019
|
|
8.5
|
%
|
|
1,280.0
|
|
|
1,305.0
|
|
||
Unamortized premium on senior notes due 2019
|
|
|
|
4.0
|
|
|
4.2
|
|
|||
Senior subordinated notes due 2017
|
|
12.535
|
%
|
|
42.5
|
|
|
92.5
|
|
||
Total long-term debt
|
|
|
|
3,172.4
|
|
|
3,251.2
|
|
|||
Less current maturities of long-term debt
|
|
|
|
(15.4
|
)
|
|
(45.4
|
)
|
|||
Long-term debt, excluding current maturities
|
|
|
|
$
|
3,157.0
|
|
|
$
|
3,205.8
|
|
5.
|
Income Taxes
|
6.
|
Shareholders' Equity
|
(in millions, except per share amounts)
|
|
Dividends Per Share
|
|
Amount
|
||||
2014:
|
|
|
|
|
||||
First Quarter
|
|
$
|
0.0425
|
|
|
$
|
7.3
|
|
2013:
|
|
|
|
|
||||
First Quarter
|
|
$
|
—
|
|
|
$
|
—
|
|
Second Quarter
|
|
$
|
—
|
|
|
$
|
—
|
|
Third Quarter
|
|
$
|
—
|
|
|
$
|
—
|
|
Fourth Quarter
|
|
$
|
0.0425
|
|
|
$
|
7.3
|
|
7.
|
Equity-Based Compensation
|
Options
|
Number of Options
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Contractual Term
|
Aggregate Intrinsic Value (in millions)
|
|||||
Outstanding at January 1, 2014
|
1,280,255
|
|
$
|
17.00
|
|
|
|
||
Granted
|
1,223,388
|
|
$
|
24.29
|
|
|
|
||
Forfeited/Expired
|
—
|
|
$
|
—
|
|
|
|
||
Exercised
|
(7,807
|
)
|
$
|
17.00
|
|
|
$
|
0.1
|
|
Outstanding at March 31, 2014
|
2,495,836
|
|
$
|
20.57
|
|
9.0
|
$
|
17.1
|
|
Vested at March 31, 2014
|
448,464
|
|
$
|
17.00
|
|
7.9
|
$
|
4.7
|
|
Exercisable at March 31, 2014
|
448,464
|
|
$
|
17.00
|
|
7.9
|
$
|
4.7
|
|
Expected to vest at March 31, 2014
|
1,973,141
|
|
$
|
21.36
|
|
9.3
|
$
|
12.0
|
|
Assumptions
|
Three Months Ended March 31, 2014
|
||
Weighted-average grant date fair value
|
$
|
7.20
|
|
Weighted-average volatility
(1)
|
30.00
|
%
|
|
Weighted-average risk-free rate
(2)
|
1.77
|
%
|
|
Dividend yield
|
0.70
|
%
|
|
Expected term (in years)
(3)
|
6.0
|
|
(1)
|
Based upon an assessment of the two-year, five-year and implied volatility for the Company’s selected peer group, adjusted for the Company’s leverage.
|
(2)
|
Based on a composite U.S. Treasury rate.
|
(3)
|
The expected term is calculated using the simplified method. The simplified method defines the expected term as the average of the option’s contractual term and the option’s weighted-average vesting period. The Company utilizes this method as it has limited historical stock option data that is sufficient to derive a reasonable estimate of the expected stock option term.
|
|
Number of Units
|
Weighted-Average Grant-Date Fair Value
|
|||
Nonvested at January 1, 2014
|
1,351,572
|
|
$
|
17.04
|
|
Granted
|
25,773
|
|
24.29
|
|
|
Vested/Settled
|
(596
|
)
|
17.00
|
|
|
Forfeited
|
(33,992
|
)
|
17.00
|
|
|
Nonvested at March 31, 2014
|
1,342,757
|
|
$
|
17.18
|
|
8.
|
Earnings per Share
|
|
Three Months Ended March 31,
|
||||
(in millions)
|
2014
|
|
2013
|
||
Weighted-average shares - basic
|
169.6
|
|
|
145.2
|
|
Effect of dilutive securities
|
2.7
|
|
|
0.9
|
|
Weighted-average shares - diluted
|
172.3
|
|
|
146.1
|
|
9.
|
Deferred Compensation Plan
|
10.
|
Commitments and Contingencies
|
11.
|
Segment Information
|
(in millions)
|
|
Corporate
|
|
Public
|
|
Other
|
|
Headquarters
|
|
Total
|
||||||||||
Three Months Ended March 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
1,505.6
|
|
|
$
|
969.9
|
|
|
$
|
176.8
|
|
|
$
|
—
|
|
|
$
|
2,652.3
|
|
Income (loss) from operations
|
|
101.1
|
|
|
54.1
|
|
|
6.5
|
|
|
(25.9
|
)
|
|
135.8
|
|
|||||
Depreciation and amortization expense
|
|
(24.1
|
)
|
|
(10.9
|
)
|
|
(2.1
|
)
|
|
(14.9
|
)
|
|
(52.0
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
|
$
|
1,403.9
|
|
|
$
|
846.8
|
|
|
$
|
161.0
|
|
|
$
|
—
|
|
|
$
|
2,411.7
|
|
Income (loss) from operations
|
|
94.1
|
|
|
45.6
|
|
|
6.1
|
|
|
(25.7
|
)
|
|
120.1
|
|
|||||
Depreciation and amortization expense
|
|
(24.4
|
)
|
|
(11.0
|
)
|
|
(2.3
|
)
|
|
(14.3
|
)
|
|
(52.0
|
)
|
12.
|
Supplemental Guarantor Information
|
Condensed Consolidating Balance Sheet
|
|||||||||||||||||||||||||||
March 31, 2014
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
290.5
|
|
|
$
|
—
|
|
|
$
|
22.2
|
|
|
$
|
—
|
|
|
$
|
(6.0
|
)
|
|
$
|
306.7
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
1,255.2
|
|
|
79.8
|
|
|
—
|
|
|
—
|
|
|
1,335.0
|
|
|||||||
Merchandise inventory
|
—
|
|
|
—
|
|
|
384.1
|
|
|
4.3
|
|
|
—
|
|
|
—
|
|
|
388.4
|
|
|||||||
Miscellaneous receivables
|
—
|
|
|
50.5
|
|
|
107.6
|
|
|
6.4
|
|
|
—
|
|
|
—
|
|
|
164.5
|
|
|||||||
Prepaid expenses and other
|
—
|
|
|
14.5
|
|
|
37.1
|
|
|
4.5
|
|
|
—
|
|
|
(2.8
|
)
|
|
53.3
|
|
|||||||
Total current assets
|
—
|
|
|
355.5
|
|
|
1,784.0
|
|
|
117.2
|
|
|
—
|
|
|
(8.8
|
)
|
|
2,247.9
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and equipment, net
|
—
|
|
|
70.9
|
|
|
57.4
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
|
129.9
|
|
|||||||
Goodwill
|
—
|
|
|
751.9
|
|
|
1,439.0
|
|
|
28.2
|
|
|
—
|
|
|
—
|
|
|
2,219.1
|
|
|||||||
Other intangible assets, net
|
—
|
|
|
332.4
|
|
|
948.0
|
|
|
6.2
|
|
|
—
|
|
|
—
|
|
|
1,286.6
|
|
|||||||
Deferred financing costs, net
|
—
|
|
|
27.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27.5
|
|
|||||||
Other assets
|
4.7
|
|
|
1.5
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
(5.9
|
)
|
|
1.5
|
|
|||||||
Investment in and advances to subsidiaries
|
750.1
|
|
|
2,820.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,570.7
|
)
|
|
—
|
|
|||||||
Total assets
|
$
|
754.8
|
|
|
$
|
4,360.3
|
|
|
$
|
4,228.4
|
|
|
$
|
154.4
|
|
|
$
|
—
|
|
|
$
|
(3,585.4
|
)
|
|
$
|
5,912.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable—trade
|
$
|
—
|
|
|
$
|
18.3
|
|
|
$
|
631.9
|
|
|
$
|
39.5
|
|
|
$
|
—
|
|
|
$
|
(6.0
|
)
|
|
$
|
683.7
|
|
Accounts payable—inventory financing
|
—
|
|
|
—
|
|
|
250.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250.2
|
|
|||||||
Current maturities of
long-term debt
|
—
|
|
|
15.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15.4
|
|
|||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
89.4
|
|
|
4.2
|
|
|
—
|
|
|
—
|
|
|
93.6
|
|
|||||||
Accrued expenses
|
—
|
|
|
212.4
|
|
|
157.2
|
|
|
8.8
|
|
|
—
|
|
|
(2.8
|
)
|
|
375.6
|
|
|||||||
Total current liabilities
|
—
|
|
|
246.1
|
|
|
1,128.7
|
|
|
52.5
|
|
|
—
|
|
|
(8.8
|
)
|
|
1,418.5
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Debt
|
—
|
|
|
3,157.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,157.0
|
|
|||||||
Deferred income taxes
|
—
|
|
|
169.2
|
|
|
374.8
|
|
|
1.5
|
|
|
—
|
|
|
(4.7
|
)
|
|
540.8
|
|
|||||||
Other liabilities
|
—
|
|
|
37.9
|
|
|
3.4
|
|
|
1.3
|
|
|
—
|
|
|
(1.2
|
)
|
|
41.4
|
|
|||||||
Total long-term liabilities
|
—
|
|
|
3,364.1
|
|
|
378.2
|
|
|
2.8
|
|
|
—
|
|
|
(5.9
|
)
|
|
3,739.2
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total shareholders’ equity
|
754.8
|
|
|
750.1
|
|
|
2,721.5
|
|
|
99.1
|
|
|
—
|
|
|
(3,570.7
|
)
|
|
754.8
|
|
|||||||
Total liabilities and shareholders’ equity
|
$
|
754.8
|
|
|
$
|
4,360.3
|
|
|
$
|
4,228.4
|
|
|
$
|
154.4
|
|
|
$
|
—
|
|
|
$
|
(3,585.4
|
)
|
|
$
|
5,912.5
|
|
Condensed Consolidating Balance Sheet
|
|||||||||||||||||||||||||||
December 31, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
196.5
|
|
|
$
|
—
|
|
|
$
|
14.0
|
|
|
$
|
—
|
|
|
$
|
(22.4
|
)
|
|
$
|
188.1
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
1,375.9
|
|
|
75.1
|
|
|
—
|
|
|
—
|
|
|
1,451.0
|
|
|||||||
Merchandise inventory
|
—
|
|
|
—
|
|
|
378.9
|
|
|
3.1
|
|
|
—
|
|
|
—
|
|
|
382.0
|
|
|||||||
Miscellaneous receivables
|
—
|
|
|
49.9
|
|
|
91.0
|
|
|
5.4
|
|
|
—
|
|
|
—
|
|
|
146.3
|
|
|||||||
Prepaid expenses and other
|
—
|
|
|
10.7
|
|
|
33.4
|
|
|
5.1
|
|
|
—
|
|
|
(3.1
|
)
|
|
46.1
|
|
|||||||
Total current assets
|
—
|
|
|
257.1
|
|
|
1,879.2
|
|
|
102.7
|
|
|
—
|
|
|
(25.5
|
)
|
|
2,213.5
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and equipment, net
|
—
|
|
|
69.7
|
|
|
59.6
|
|
|
1.8
|
|
|
—
|
|
|
—
|
|
|
131.1
|
|
|||||||
Goodwill
|
—
|
|
|
751.9
|
|
|
1,439.0
|
|
|
29.4
|
|
|
—
|
|
|
—
|
|
|
2,220.3
|
|
|||||||
Other intangible assets, net
|
—
|
|
|
338.5
|
|
|
982.8
|
|
|
6.7
|
|
|
—
|
|
|
—
|
|
|
1,328.0
|
|
|||||||
Deferred financing costs, net
|
—
|
|
|
30.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30.1
|
|
|||||||
Other assets
|
4.9
|
|
|
1.4
|
|
|
0.1
|
|
|
0.9
|
|
|
—
|
|
|
(5.7
|
)
|
|
1.6
|
|
|||||||
Investment in and advances to subsidiaries
|
706.8
|
|
|
2,909.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,616.2
|
)
|
|
—
|
|
|||||||
Total assets
|
$
|
711.7
|
|
|
$
|
4,358.1
|
|
|
$
|
4,360.7
|
|
|
$
|
141.5
|
|
|
$
|
—
|
|
|
$
|
(3,647.4
|
)
|
|
$
|
5,924.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable-trade
|
$
|
—
|
|
|
$
|
21.4
|
|
|
$
|
637.3
|
|
|
$
|
26.5
|
|
|
$
|
—
|
|
|
$
|
(22.4
|
)
|
|
$
|
662.8
|
|
Accounts payable-inventory financing
|
—
|
|
|
—
|
|
|
256.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256.6
|
|
|||||||
Current maturities of long-term debt
|
—
|
|
|
45.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45.4
|
|
|||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
89.9
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
94.8
|
|
|||||||
Accrued expenses
|
—
|
|
|
163.5
|
|
|
175.1
|
|
|
7.5
|
|
|
—
|
|
|
(3.1
|
)
|
|
343.0
|
|
|||||||
Total current liabilities
|
—
|
|
|
230.3
|
|
|
1,158.9
|
|
|
38.9
|
|
|
—
|
|
|
(25.5
|
)
|
|
1,402.6
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Debt
|
—
|
|
|
3,205.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,205.8
|
|
|||||||
Deferred income taxes
|
—
|
|
|
178.3
|
|
|
388.4
|
|
|
1.6
|
|
|
—
|
|
|
(4.8
|
)
|
|
563.5
|
|
|||||||
Other liabilities
|
—
|
|
|
36.9
|
|
|
3.6
|
|
|
1.4
|
|
|
—
|
|
|
(0.9
|
)
|
|
41.0
|
|
|||||||
Total long-term liabilities
|
—
|
|
|
3,421.0
|
|
|
392.0
|
|
|
3.0
|
|
|
—
|
|
|
(5.7
|
)
|
|
3,810.3
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total shareholders’ equity
|
711.7
|
|
|
706.8
|
|
|
2,809.8
|
|
|
99.6
|
|
|
—
|
|
|
(3,616.2
|
)
|
|
711.7
|
|
|||||||
Total liabilities and shareholders' equity
|
$
|
711.7
|
|
|
$
|
4,358.1
|
|
|
$
|
4,360.7
|
|
|
$
|
141.5
|
|
|
$
|
—
|
|
|
$
|
(3,647.4
|
)
|
|
$
|
5,924.6
|
|
Consolidating Statement of Operations
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2014
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,518.1
|
|
|
$
|
134.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,652.3
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
2,107.5
|
|
|
119.6
|
|
|
—
|
|
|
—
|
|
|
2,227.1
|
|
|||||||
Gross profit
|
—
|
|
|
—
|
|
|
410.6
|
|
|
14.6
|
|
|
—
|
|
|
—
|
|
|
425.2
|
|
|||||||
Selling and administrative expenses
|
—
|
|
|
25.9
|
|
|
226.3
|
|
|
8.7
|
|
|
—
|
|
|
—
|
|
|
260.9
|
|
|||||||
Advertising expense
|
—
|
|
|
—
|
|
|
27.8
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
28.5
|
|
|||||||
(Loss) income from operations
|
—
|
|
|
(25.9
|
)
|
|
156.5
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
135.8
|
|
|||||||
Interest (expense) income, net
|
—
|
|
|
(50.2
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(50.1
|
)
|
|||||||
Net loss on extinguishments of long-term debt
|
—
|
|
|
(5.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.4
|
)
|
|||||||
Management fee
|
—
|
|
|
1.0
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other income, net
|
—
|
|
|
—
|
|
|
0.4
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|||||||
(Loss) income before income taxes
|
—
|
|
|
(80.5
|
)
|
|
156.9
|
|
|
4.4
|
|
|
—
|
|
|
—
|
|
|
80.8
|
|
|||||||
Income tax benefit (expense)
|
—
|
|
|
30.2
|
|
|
(58.9
|
)
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|
(29.9
|
)
|
|||||||
(Loss) income before equity in earnings of subsidiaries
|
—
|
|
|
(50.3
|
)
|
|
98.0
|
|
|
3.2
|
|
|
—
|
|
|
—
|
|
|
50.9
|
|
|||||||
Equity in earnings of subsidiaries
|
50.9
|
|
|
101.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(152.1
|
)
|
|
—
|
|
|||||||
Net income
|
$
|
50.9
|
|
|
$
|
50.9
|
|
|
$
|
98.0
|
|
|
$
|
3.2
|
|
|
$
|
—
|
|
|
$
|
(152.1
|
)
|
|
$
|
50.9
|
|
Consolidating Statement of Operations
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,289.8
|
|
|
$
|
121.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,411.7
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
1,902.1
|
|
|
107.6
|
|
|
—
|
|
|
—
|
|
|
2,009.7
|
|
|||||||
Gross profit
|
—
|
|
|
—
|
|
|
387.7
|
|
|
14.3
|
|
|
—
|
|
|
—
|
|
|
402.0
|
|
|||||||
Selling and administrative expenses
|
—
|
|
|
25.7
|
|
|
216.7
|
|
|
9.1
|
|
|
—
|
|
|
—
|
|
|
251.5
|
|
|||||||
Advertising expense
|
—
|
|
|
—
|
|
|
29.6
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
30.4
|
|
|||||||
(Loss) income from operations
|
—
|
|
|
(25.7
|
)
|
|
141.4
|
|
|
4.4
|
|
|
—
|
|
|
—
|
|
|
120.1
|
|
|||||||
Interest (expense) income, net
|
—
|
|
|
(72.2
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(72.1
|
)
|
|||||||
Net loss on extinguishments of long-term debt
|
—
|
|
|
(3.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|||||||
Management fee
|
—
|
|
|
0.9
|
|
|
—
|
|
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other income, net
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|||||||
(Loss) income before income taxes
|
—
|
|
|
(100.9
|
)
|
|
141.7
|
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|
44.5
|
|
|||||||
Income tax benefit (expense)
|
—
|
|
|
37.7
|
|
|
(53.0
|
)
|
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
(16.2
|
)
|
|||||||
(Loss) income before equity in earnings of subsidiaries
|
—
|
|
|
(63.2
|
)
|
|
88.7
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
28.3
|
|
|||||||
Equity in earnings of subsidiaries
|
28.3
|
|
|
91.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(119.8
|
)
|
|
—
|
|
|||||||
Net income
|
$
|
28.3
|
|
|
$
|
28.3
|
|
|
$
|
88.7
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
$
|
(119.8
|
)
|
|
$
|
28.3
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2014
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Comprehensive income (loss)
|
$
|
47.0
|
|
|
$
|
47.0
|
|
|
$
|
98.0
|
|
|
$
|
(0.7
|
)
|
|
$
|
—
|
|
|
$
|
(144.3
|
)
|
|
$
|
47.0
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Comprehensive income
|
$
|
25.9
|
|
|
$
|
25.9
|
|
|
$
|
88.7
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
(115.0
|
)
|
|
$
|
25.9
|
|
Condensed Consolidating Statement of Cash Flows
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2014
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
14.3
|
|
|
$
|
207.0
|
|
|
$
|
8.6
|
|
|
$
|
—
|
|
|
$
|
16.4
|
|
|
$
|
246.3
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Capital expenditures
|
—
|
|
|
(8.6
|
)
|
|
(0.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.3
|
)
|
|||||||
Payment of accrued charitable contribution related to the MPK Coworker Incentive Plan II
|
—
|
|
|
(20.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20.9
|
)
|
|||||||
Net cash used in investing activities
|
—
|
|
|
(29.5
|
)
|
|
(0.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30.2
|
)
|
|||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Repayments of long-term debt
|
—
|
|
|
(3.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|||||||
Payments to extinguish long-term debt
|
—
|
|
|
(79.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(79.5
|
)
|
|||||||
Net change in accounts payable-inventory financing
|
—
|
|
|
—
|
|
|
(6.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.4
|
)
|
|||||||
Proceeds from stock option exercises
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|||||||
Dividends paid
|
(7.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.3
|
)
|
|||||||
Advances from (to) affiliates
|
7.2
|
|
|
192.6
|
|
|
(199.9
|
)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Net cash provided by (used in) financing activities
|
—
|
|
|
109.2
|
|
|
(206.3
|
)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
(97.0
|
)
|
|||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|||||||
Net increase in cash and cash equivalents
|
—
|
|
|
94.0
|
|
|
—
|
|
|
8.2
|
|
|
—
|
|
|
16.4
|
|
|
118.6
|
|
|||||||
Cash and cash equivalents—beginning of period
|
—
|
|
|
196.5
|
|
|
—
|
|
|
14.0
|
|
|
—
|
|
|
(22.4
|
)
|
|
188.1
|
|
|||||||
Cash and cash equivalents—end of period
|
$
|
—
|
|
|
$
|
290.5
|
|
|
$
|
—
|
|
|
$
|
22.2
|
|
|
$
|
—
|
|
|
$
|
(6.0
|
)
|
|
$
|
306.7
|
|
Condensed Consolidating Statement of Cash Flows
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2013
|
|||||||||||||||||||||||||||
(in millions)
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiary
|
|
Co-Issuer
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||||
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
9.7
|
|
|
$
|
171.7
|
|
|
$
|
7.1
|
|
|
$
|
—
|
|
|
$
|
19.5
|
|
|
$
|
208.0
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Capital expenditures
|
—
|
|
|
(7.8
|
)
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.8
|
)
|
|||||||
Net cash used in investing activities
|
—
|
|
|
(7.8
|
)
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.8
|
)
|
|||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Repayments of long-term debt
|
—
|
|
|
(40.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40.0
|
)
|
|||||||
Payments to extinguish long-term debt
|
—
|
|
|
(53.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53.1
|
)
|
|||||||
Net change in accounts payable-inventory financing
|
—
|
|
|
—
|
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.7
|
|
|||||||
Advances from (to) affiliates
|
—
|
|
|
166.7
|
|
|
(166.5
|
)
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other financing activities
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||||
Net cash provided by (used in) financing activities
|
—
|
|
|
73.5
|
|
|
(162.8
|
)
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
(89.5
|
)
|
|||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|||||||
Net increase in cash and cash equivalents
|
—
|
|
|
75.4
|
|
|
7.9
|
|
|
6.4
|
|
|
—
|
|
|
19.5
|
|
|
109.2
|
|
|||||||
Cash and cash equivalents—beginning of period
|
—
|
|
|
48.0
|
|
|
—
|
|
|
9.8
|
|
|
—
|
|
|
(19.9
|
)
|
|
37.9
|
|
|||||||
Cash and cash equivalents—end of period
|
$
|
—
|
|
|
$
|
123.4
|
|
|
$
|
7.9
|
|
|
$
|
16.2
|
|
|
$
|
—
|
|
|
$
|
(0.4
|
)
|
|
$
|
147.1
|
|
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 approximately 7%, 10% and 10% of our net sales for the years ended December 31, 2013, 2012 and 2011, respectively. In 2013, Public segment results were negatively impacted by sequestration, the partial shutdown of the federal government and federal government budget uncertainty. First quarter 2014 Public segment results were negatively impacted by ongoing federal government uncertainty as budget allocations continued to be refined.
|
•
|
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. While macroeconomic uncertainty drove a more cautious approach to customer spending in 2012 and the early part of 2013, uncertainty began to dissipate in the back half of 2013 and this trend continued in the first quarter of 2014. We will continue to closely monitor macroeconomic conditions during the remainder of 2014. Uncertainties related to potential reductions in government spending, requirements associated with implementation of the Affordable Care Act, 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 March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net sales
|
$
|
2,652.3
|
|
|
$
|
2,411.7
|
|
Gross profit
|
425.2
|
|
|
402.0
|
|
||
Income from operations
|
135.8
|
|
|
120.1
|
|
||
Net income
|
50.9
|
|
|
28.3
|
|
||
Non-GAAP net income
|
81.1
|
|
|
56.3
|
|
||
Adjusted EBITDA
|
193.7
|
|
|
178.6
|
|
||
Average daily sales
|
42.1
|
|
|
38.3
|
|
||
Net debt (defined as long-term debt minus cash and cash equivalents)
|
2,865.7
|
|
|
3,533.7
|
|
||
Cash conversion cycle (in days)
(1)
|
22
|
|
|
22
|
|
(1)
|
Cash conversion cycle is defined as days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. The prior period has been revised to conform to the current definition.
|
|
|
Three Months Ended
March 31, 2014
|
|
Three Months Ended
March 31, 2013
|
||||||||||
|
|
Dollars in
Millions
|
|
Percentage of
Net Sales
|
|
Dollars in
Millions
|
|
Percentage of
Net Sales
|
||||||
Net sales
|
|
$
|
2,652.3
|
|
|
100.0
|
%
|
|
$
|
2,411.7
|
|
|
100.0
|
%
|
Cost of sales
|
|
2,227.1
|
|
|
84.0
|
|
|
2,009.7
|
|
|
83.3
|
|
||
Gross profit
|
|
425.2
|
|
|
16.0
|
|
|
402.0
|
|
|
16.7
|
|
||
Selling and administrative expenses
|
|
260.9
|
|
|
9.8
|
|
|
251.5
|
|
|
10.4
|
|
||
Advertising expense
|
|
28.5
|
|
|
1.1
|
|
|
30.4
|
|
|
1.3
|
|
||
Income from operations
|
|
135.8
|
|
|
5.1
|
|
|
120.1
|
|
|
5.0
|
|
||
Interest expense, net
|
|
(50.1
|
)
|
|
(1.9
|
)
|
|
(72.1
|
)
|
|
(3.0
|
)
|
||
Net loss on extinguishments of long-term debt
|
|
(5.4
|
)
|
|
(0.2
|
)
|
|
(3.9
|
)
|
|
(0.2
|
)
|
||
Other income, net
|
|
0.5
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
||
Income before income taxes
|
|
80.8
|
|
|
3.0
|
|
|
44.5
|
|
|
1.8
|
|
||
Income tax expense
|
|
(29.9
|
)
|
|
(1.1
|
)
|
|
(16.2
|
)
|
|
(0.7
|
)
|
||
Net income
|
|
$
|
50.9
|
|
|
1.9
|
%
|
|
$
|
28.3
|
|
|
1.1
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||||||||
|
2014
|
|
2013
|
|
|
|
|
|||||||||||||
(dollars in millions)
|
Net Sales
|
|
Percentage
of Total Net Sales
|
|
Net Sales
|
|
Percentage
of Total Net Sales
|
|
Dollar
Change
|
|
Percent
Change
(1)
|
|||||||||
Corporate
|
$
|
1,505.6
|
|
|
56.8
|
%
|
|
$
|
1,403.9
|
|
|
58.2
|
%
|
|
$
|
101.7
|
|
|
7.2
|
%
|
Public
|
969.9
|
|
|
36.6
|
|
|
846.8
|
|
|
35.1
|
|
|
123.1
|
|
|
14.5
|
|
|||
Other
|
176.8
|
|
|
6.7
|
|
|
161.0
|
|
|
6.7
|
|
|
15.8
|
|
|
9.8
|
|
|||
Total net sales
|
$
|
2,652.3
|
|
|
100.1
|
%
|
|
$
|
2,411.7
|
|
|
100.0
|
%
|
|
$
|
240.6
|
|
|
10.0
|
%
|
(dollars in millions)
|
|
Three Months Ended March 31,
|
|
Dollar
Change
|
|
Percent
Change
|
|||||||||
2014
|
|
2013
|
|
||||||||||||
Corporate:
|
|
|
|
|
|
|
|
|
|||||||
Medium / Large
|
|
$
|
1,274.8
|
|
|
$
|
1,180.5
|
|
|
$
|
94.3
|
|
|
8.0
|
%
|
Small Business
|
|
230.8
|
|
|
223.4
|
|
|
7.4
|
|
|
3.3
|
|
|||
Total Corporate
|
|
$
|
1,505.6
|
|
|
$
|
1,403.9
|
|
|
$
|
101.7
|
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
Public:
|
|
|
|
|
|
|
|
|
|||||||
Government
|
|
$
|
254.2
|
|
|
$
|
252.3
|
|
|
$
|
1.9
|
|
|
0.7
|
%
|
Education
|
|
321.6
|
|
|
232.2
|
|
|
89.4
|
|
|
38.5
|
|
|||
Healthcare
|
|
394.1
|
|
|
362.3
|
|
|
31.8
|
|
|
8.8
|
|
|||
Total Public
|
|
$
|
969.9
|
|
|
$
|
846.8
|
|
|
$
|
123.1
|
|
|
14.5
|
%
|
|
|
Three Months Ended
March 31, 2014
|
|
Three Months Ended
March 31, 2013
|
|
|
|||||||||||
|
|
Dollars in
Millions
|
|
Operating
Margin
Percentage
|
|
Dollars in
Millions
|
|
Operating
Margin
Percentage
|
|
Percent Change
in Income (loss)
from Operations
|
|||||||
Segments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Corporate
|
|
$
|
101.1
|
|
|
6.7
|
%
|
|
$
|
94.1
|
|
|
6.7
|
%
|
|
7.3
|
%
|
Public
|
|
54.1
|
|
|
5.6
|
|
|
45.6
|
|
|
5.4
|
|
|
18.6
|
|
||
Other
|
|
6.5
|
|
|
3.7
|
|
|
6.1
|
|
|
3.8
|
|
|
7.4
|
|
||
Headquarters
(2)
|
|
(25.9
|
)
|
|
nm*
|
|
|
(25.7
|
)
|
|
nm*
|
|
|
0.5
|
|
||
Total income from operations
|
|
$
|
135.8
|
|
|
5.1
|
%
|
|
$
|
120.1
|
|
|
5.0
|
%
|
|
13.1
|
%
|
(1)
|
Segment income (loss) from operations includes the segment’s direct operating income (loss) and allocations for Headquarters’ costs, allocations for 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 March 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Net income
|
|
$
|
50.9
|
|
|
$
|
28.3
|
|
Amortization of intangibles
(1)
|
|
40.3
|
|
|
40.3
|
|
||
Non-cash equity-based compensation
|
|
3.3
|
|
|
1.9
|
|
||
Net loss on extinguishments of long-term debt
|
|
5.4
|
|
|
3.9
|
|
||
Interest expense adjustment related to extinguishments of long-term debt
(2)
|
|
(0.6
|
)
|
|
(0.8
|
)
|
||
Secondary-offering related expenses
|
|
0.4
|
|
|
—
|
|
||
Aggregate adjustment for income taxes
(3)
|
|
(18.6
|
)
|
|
(17.3
|
)
|
||
Non-GAAP net income
|
|
$
|
81.1
|
|
|
$
|
56.3
|
|
(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)
|
Based on a normalized effective tax rate of 39.0%.
|
(in millions)
|
|
Three Months Ended March 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Net income
|
|
$
|
50.9
|
|
|
$
|
28.3
|
|
Depreciation and amortization
|
|
52.0
|
|
|
52.0
|
|
||
Income tax expense
|
|
29.9
|
|
|
16.2
|
|
||
Interest expense, net
|
|
50.1
|
|
|
72.1
|
|
||
EBITDA
|
|
182.9
|
|
|
168.6
|
|
||
|
|
|
|
|
||||
Adjustments:
|
|
|
|
|
||||
Non-cash equity-based compensation
|
|
3.3
|
|
|
1.9
|
|
||
Sponsor fee
|
|
—
|
|
|
1.3
|
|
||
Net loss on extinguishments of long-term debt
|
|
5.4
|
|
|
3.9
|
|
||
Litigation, net
(1)
|
|
(0.3
|
)
|
|
—
|
|
||
Secondary-offering related expenses
|
|
0.4
|
|
|
—
|
|
||
Other adjustments
(2)
|
|
2.0
|
|
|
2.9
|
|
||
Total adjustments
|
|
10.8
|
|
|
10.0
|
|
||
Adjusted EBITDA
|
|
$
|
193.7
|
|
|
$
|
178.6
|
|
(1)
|
Relates to unusual, non-recurring litigation matters.
|
(2)
|
Other adjustments primarily include certain retention costs and equity investment income.
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
|
2014
|
|
2013
|
||||
EBITDA
|
|
$
|
182.9
|
|
|
$
|
168.6
|
|
Depreciation and amortization
|
|
(52.0
|
)
|
|
(52.0
|
)
|
||
Income tax expense
|
|
(29.9
|
)
|
|
(16.2
|
)
|
||
Interest expense, net
|
|
(50.1
|
)
|
|
(72.1
|
)
|
||
Net income
|
|
50.9
|
|
|
28.3
|
|
||
Depreciation and amortization
|
|
52.0
|
|
|
52.0
|
|
||
Equity-based compensation expense
|
|
3.3
|
|
|
1.9
|
|
||
Deferred income taxes
|
|
(22.1
|
)
|
|
(14.1
|
)
|
||
Amortization of deferred financing costs, debt premium and debt discount, net
|
|
1.6
|
|
|
3.0
|
|
||
Net loss on extinguishments of long-term debt
|
|
5.4
|
|
|
3.9
|
|
||
Changes in assets and liabilities
|
|
155.2
|
|
|
133.0
|
|
||
Net cash provided by operating activities
|
|
$
|
246.3
|
|
|
$
|
208.0
|
|
(in millions)
|
Three Months Ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
246.3
|
|
|
$
|
208.0
|
|
Investing activities
|
(30.2
|
)
|
|
(8.8
|
)
|
||
|
|
|
|
||||
Net change in accounts payable-inventory financing
|
(6.4
|
)
|
|
3.7
|
|
||
Other cash flows from financing activities
|
(90.6
|
)
|
|
(93.2
|
)
|
||
Financing activities
|
(97.0
|
)
|
|
(89.5
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(0.5
|
)
|
|
(0.5
|
)
|
||
Net increase in cash and cash equivalents
|
$
|
118.6
|
|
|
$
|
109.2
|
|
(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 peri
od. The prior period has been revised to conform to the current definition.
|
(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)
|
|
March 31,
2014
|
|
December 31,
2013
|
|||||
Senior secured asset-based revolving credit facility
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
Senior secured term loan facility
|
|
3.25
|
%
|
|
1,525.1
|
|
|
1,528.9
|
|
||
Unamortized discount on senior secured term loan facility
|
|
|
|
(4.2
|
)
|
|
(4.4
|
)
|
|||
Senior secured notes due 2018
|
|
8.0
|
%
|
|
325.0
|
|
|
325.0
|
|
||
Senior notes due 2019
|
|
8.5
|
%
|
|
1,280.0
|
|
|
1,305.0
|
|
||
Unamortized premium on senior notes due 2019
|
|
|
|
4.0
|
|
|
4.2
|
|
|||
Senior subordinated notes due 2017
|
|
12.535
|
%
|
|
42.5
|
|
|
92.5
|
|
||
Total long-term debt
|
|
|
|
3,172.4
|
|
|
3,251.2
|
|
|||
Less current maturities of long-term debt
|
|
|
|
(15.4
|
)
|
|
(45.4
|
)
|
|||
Long-term debt, excluding current maturities
|
|
|
|
$
|
3,157.0
|
|
|
$
|
3,205.8
|
|
(in millions)
|
|
March 31,
2014
|
|
December 31, 2013
|
||||
Revolving Loan inventory financing agreement
|
|
$
|
250.1
|
|
|
$
|
256.1
|
|
Other inventory financing agreements
|
|
0.1
|
|
|
0.5
|
|
||
Accounts payable-inventory financing
|
|
$
|
250.2
|
|
|
$
|
256.6
|
|
Exhibit
|
|
Description
|
10.1
|
|
Amended and Restated Compensation Protection Agreement, dated as of March 24, 2014, by and among CDW Corporation, CDW LLC and Thomas E. Richards, previously filed as Exhibit 10.1 with CDW Corporation’s Form 8-K filed on March 28, 2014 and incorporated herein by reference.
|
|
|
|
10.2
|
|
Form of Compensation Protection Agreement, previously filed as Exhibit 10.2 with CDW Corporation’s Form 8-K filed on March 28, 2014 and incorporated herein by reference.
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10.3
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Form of Noncompetition Agreement under the Compensation Protection Agreement, previously filed as Exhibit 10.3 with CDW Corporation’s Form 8-K filed on March 28, 2014 and incorporated herein by reference.
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10.4*
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Form of Stock Option Agreement (executive officers) under the CDW Corporation 2013 Long-Term Incentive Plan.
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10.5*
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Form of Performance Share Unit Award Agreement (executive officers) under the CDW Corporation 2013 Long-Term Incentive Plan.
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10.6*
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Form of Non-Employee Director Restricted Stock Unit Award Agreement under the CDW Corporation 2013 Long-Term Incentive Plan.
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31.1*
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Certification of Chief Executive Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934.
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31.2*
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Certification of Chief Financial Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934.
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32.1**
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Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350.
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32.2**
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Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350.
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101.INS*
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XBRL Instance Document.
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101.SCH*
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XBRL Taxonomy Extension Schema Document.
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document.
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document.
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase Document.
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document.
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*
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Filed herewith
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**
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These items are furnished and not filed.
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CDW CORPORATION
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||
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Date:
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May 12, 2014
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By:
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/s/ Ann E. Ziegler
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Ann E. Ziegler
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Senior Vice President and Chief Financial Officer
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(Duly authorized officer and principal financial officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of CDW Corporation (the "registrant");
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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/s/ Thomas E. Richards
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Thomas E. Richards
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Chairman and Chief Executive Officer
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CDW Corporation
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May 12, 2014
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1.
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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
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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
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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
|
May 12, 2014
|
/s/ Thomas E. Richards
|
Thomas E. Richards
|
Chairman and Chief Executive Officer
|
CDW Corporation
|
May 12, 2014
|
/s/ Ann E. Ziegler
|
Ann E. Ziegler
|
Senior Vice President and Chief Financial Officer
|
CDW Corporation
|
May 12, 2014
|