FORM 8-K |
CDW CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware | 001-35985 | 26-0273989 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
75 Tri-State International Lincolnshire, Illinois | 60069 | |
(Address of principal executive offices) | (Zip Code) |
Emerging growth Company | ¨ |
• | Part I, Item 1. Business |
• | Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Part II, Item 8. Financial Statements and Supplementary Data |
Exhibit No. | Description | |
23.1 | Consent of Ernst & Young LLP | |
99.1 | Part I, Item 1. Business | |
99.2 | Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
99.3 | Part II, Item 8. Financial Statements and Supplementary Data | |
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: | August 25, 2017 | By: | /s/ Ann E. Ziegler | |
Ann E. Ziegler | ||||
Senior Vice President and Chief Financial Officer |
Exhibit Number | Description | |
23.1 | Consent of Ernst & Young LLP | |
99.1 | Part I, Item 1. Business | |
99.2 | Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
99.3 | Part II, Item 8. Financial Statements and Supplementary Data | |
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 |
Our value proposition to our customers | Our value proposition to our vendor partners | ||
● | Broad selection of products and multi-branded IT solutions | ● | Access to over 250,000 customers throughout North America and the United Kingdom |
● | Value-added services with integration capabilities | ● | Large and established customer channels |
● | Highly-skilled specialists and engineers | ● | Strong distribution and implementation capabilities |
● | Solutions across a very broad IT landscape | ● | Value-added solutions and marketing programs that generate end-user demand |
Public Segment | |||||||||||
Customer Channels | Corporate Segment | Small Business Segment | Government | Education | Healthcare | Other | |||||
Target Customers | >250 employees | 1 - 250 employees | Various federal, state and local agencies | Higher education and K-12 | Hospitals, ambulatory service providers and long-term care facilities | Canada and United Kingdom | |||||
2016 Net Sales (in billions) | $5.9 | $1.1 | $1.9 | $2.0 | $1.7 | $1.4 |
• | Data Center: We assess our customers data center needs, design flexible, resilient and efficient solutions and manage the solution throughout its lifecycle. Our broad portfolio of hardware and software, for both on and off-premise solutions, enables us to provide a well-integrated solution, including converged and hyperconverged infrastructure, physical and virtualized servers, software defined data center, storage and energy-efficient power and cooling. |
• | Digital Workspace: We build solutions that deliver access to applications that improve our customers’ productivity regardless of time or location. We connect our customers’ physical devices, including laptops, desktops and mobile devices, and utilize collaboration solutions to unite communications and applications via the integration of products that facilitate the use of multiple enterprise communication methods including email, instant messaging, presence, social media, voice, video, hardware, software and services. We also host cloud-based collaboration solutions. Our solutions provide the tools that allow our customers’ employees to share knowledge, ideas and information among each other and with clients and partners effectively, securely and quickly. |
• | Security: We assess our customers’ security needs and provide them with threat prevention tools in order to protect their networks, servers and applications such as, anti-virus, anti-spam, content filtering, intrusion prevention, firewall and virtual private network services, and network access control. We also design and implement data loss prevention solutions, using data monitoring and encryption across a wide array of devices to ensure the security of customer information, personal employee information and research and development data. |
• | Virtualization: We design and implement server, storage and desktop virtualization solutions. Virtualization enables our customers to efficiently utilize hardware resources by running multiple, independent, virtual operating systems on a single computer and multiple virtual servers simultaneously on a single server. Virtualization also can separate a desktop environment and associated application software from the hardware device that is used to access it, and provides employees with remote desktop access. Our specialists assist customers with the steps of implementing virtualization solutions, including evaluating network environments, deploying shared storage options and licensing platform software. |
• | Services: We advise on, architect and manage integrated business technology for commercial and business organizations. Our solutions include integrated cloud, collaboration, data center, mobility and security business technology, from the physical to the application layer. We provide advisory, architectural and managed services across basic, discrete and integrated business technology solutions. We leverage best-in-class partner technology platforms to seamlessly architect and manage disparate IT platforms into integrated business technology solutions. |
Years Ended December 31, | |||||||||||||||||||||
2016 | 2015(1) | 2014 (1) | |||||||||||||||||||
Dollars in Millions | Percentage of Total Net Sales | Dollars in Millions | Percentage of Total Net Sales | Dollars in Millions | Percentage of Total Net Sales | ||||||||||||||||
Notebooks/Mobile Devices | 2,934.3 | 21.0 | % | $ | 2,538.5 | 19.5 | % | $ | 2,352.9 | 19.5 | % | ||||||||||
Netcomm Products | 1,950.9 | 14.0 | 1,912.3 | 14.7 | 1,613.9 | 13.4 | |||||||||||||||
Desktops | 1,054.8 | 7.5 | 968.6 | 7.5 | 1,058.2 | 8.8 | |||||||||||||||
Enterprise and Data Storage (Including Drives) | 1,057.6 | 7.6 | 1,065.5 | 8.2 | 1,023.9 | 8.5 | |||||||||||||||
Other Hardware | 3,981.4 | 28.5 | 3,798.3 | 29.2 | 3,492.3 | 28.8 | |||||||||||||||
Software(2) | 2,406.9 | 17.2 | 2,161.3 | 16.6 | 2,065.8 | 17.1 | |||||||||||||||
Services(2) | 579.0 | 4.1 | 472.8 | 3.6 | 371.1 | 3.1 | |||||||||||||||
Other (3) | 17.0 | 0.1 | 71.4 | 0.7 | 96.4 | 0.8 | |||||||||||||||
Total Net sales | $ | 13,981.9 | 100.0 | % | $ | 12,988.7 | 100.0 | % | $ | 12,074.5 | 100.0 | % |
(1) | Amounts have been reclassified for changes in individual product classifications to conform to the presentation for the year ended December 31, 2016. |
(2) | Certain software and services revenue is recorded on a net basis for accounting purposes, so the category percentage of net revenues is not representative of the category percentage of gross profits. |
(3) | Includes items such as delivery charges to customers and certain commission revenue. |
• | General economic conditions are a key factor affecting our ability to generate sales and achieve our targeted operating results as they impact our customers’ willingness to spend on information technology. This is particularly the case for corporate customers, as their purchases tend to reflect confidence in their business prospects, which are driven |
• | Changes in spending policies, budget priorities and revenue levels are a key factor influencing government purchasing levels. Our Government results also reflect increased interest in meeting public safety needs through technology solutions by state and local customers, as well as our ability to address strategic changes made by the Federal government toward a more programmatic technology strategy. |
• | Customer focus on security has been, and we expect will continue to be, an ongoing trend. Customers are seeking solutions to protect their internal systems against threats and are implementing solutions that provide enterprise-wide visibility, detection expertise and investigation workflows. They are also implementing endpoint security, firewall segmentation and user authentication tools. |
• | The Healthcare industry continues to experience consolidation, which has caused uneven technology growth as customers assess their post-acquisition state. |
• | Our Education sales channel performance continues to be impacted by the implementation of networking projects related to the US Federal Communications Commission E-Rate program. We are also seeing positive impacts as schools develop digital testing and curriculum programs, and work to create new learning environments for students. Within the higher education market, networking projects continue to be a key priority across campuses. While technology is an opportunity to create cost savings and improve productivity, funding is a key determinant of technology spending in education. |
• | There continues to be substantial uncertainty regarding the impact of Brexit. Potential adverse consequences of Brexit such as global market uncertainty, volatility in currency exchange rates, greater restrictions on imports and exports between UK and EU countries and increased regulatory complexities could have a negative impact on our business, financial condition and results of operations. |
• | Technology trends drive customer purchase behaviors and we are seeing continuing evolution in the market. Innovation influences customer purchases across all of our customer end-markets. Key trends in technology include increasing adoption of cloud-based solutions for certain key workloads, including security, as well as adoption of hyper-converged appliances to deliver greater flexibility and efficiency. In addition, hybrid cloud solutions are being adopted, along with software being embedded into solutions. |
Years Ended December 31, | |||||||||||
(dollars in millions) | 2016 | 2015 | 2014 | ||||||||
Net sales | $ | 13,981.9 | $ | 12,988.7 | $ | 12,074.5 | |||||
Gross profit | 2,327.2 | 2,115.8 | 1,921.3 | ||||||||
Income from operations | 819.2 | 742.0 | 673.0 | ||||||||
Net income | 424.4 | 403.1 | 244.9 | ||||||||
Non-GAAP net income | 569.0 | 503.5 | 409.9 | ||||||||
Adjusted EBITDA | 1,117.3 | 1,018.5 | 907.0 | ||||||||
Average daily sales | 55.0 | 51.1 | 47.5 | ||||||||
Net debt (defined as total debt minus cash and cash equivalents) (1) | 2,970.7 | 3,222.1 | 2,821.5 | ||||||||
Cash conversion cycle (in days) (2) | 19 | 21 | 21 |
(1) | As a result of the adoption of Accounting Standards Update (ASU) 2015-03 during the second quarter of 2015, historical periods have been revised to reflect the change in the presentation of deferred financing costs, which are now shown as a reduction of Long-term debt, instead of being presented as a separate asset on the Consolidated Balance Sheet. In the third quarter of 2015, we adopted ASU 2015-15 which allows entities to present deferred financing costs for line-of-credit arrangements as an asset. We retroactively adjusted the deferred financing costs and Long-term debt liability presented in historical periods to align it to the current period presentation. |
(2) | 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. |
Years Ended December 31, | ||||||||||||||
2016 | 2015 | |||||||||||||
Dollars in Millions | Percentage of Net Sales (1) | Dollars in Millions | Percentage of Net Sales(1) | |||||||||||
Net sales | $ | 13,981.9 | 100.0 | % | $ | 12,988.7 | 100.0 | % | ||||||
Cost of sales | 11,654.7 | 83.4 | 10,872.9 | 83.7 | ||||||||||
Gross profit | 2,327.2 | 16.6 | 2,115.8 | 16.3 | ||||||||||
Selling and administrative expenses | 1,345.1 | 9.6 | 1,226.0 | 9.4 | ||||||||||
Advertising expense | 162.9 | 1.2 | 147.8 | 1.1 | ||||||||||
Income from operations | 819.2 | 5.9 | 742.0 | 5.7 | ||||||||||
Interest expense, net | (146.5 | ) | (1.0 | ) | (159.5 | ) | (1.2 | ) | ||||||
Net loss on extinguishments of long-term debt | (2.1 | ) | — | (24.3 | ) | (0.2 | ) | |||||||
Gain on remeasurement of equity investment | — | — | 98.1 | 0.8 | ||||||||||
Other income (expense), net | 1.8 | — | (9.3 | ) | (0.1 | ) | ||||||||
Income before income taxes | 672.4 | 4.8 | 647.0 | 5.0 | ||||||||||
Income tax expense | (248.0 | ) | (1.8 | ) | (243.9 | ) | (1.9 | ) | ||||||
Net income | $ | 424.4 | 3.0 | % | $ | 403.1 | 3.1 | % |
(1) | Percentages may not total due to rounding. |
Years Ended December 31, | |||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||
(dollars in millions) | Net Sales | Percentage of Total Net Sales | Net Sales | Percentage of Total Net Sales | Dollar Change | Percent Change (1) | |||||||||||||||
Corporate (2) | $ | 5,889.8 | 42.1 | % | $ | 5,878.7 | 45.3 | % | $ | 11.1 | 0.2 | % | |||||||||
Small Business (2) | 1,140.1 | 8.2 | 1,089.6 | 8.4 | 50.5 | 4.6 | |||||||||||||||
Public: | |||||||||||||||||||||
Government | 1,863.7 | 13.3 | 1,700.9 | 13.1 | 162.7 | 9.6 | |||||||||||||||
Education | 2,018.3 | 14.4 | 1,818.8 | 14.0 | 199.5 | 11.0 | |||||||||||||||
Healthcare | 1,707.4 | 12.2 | 1,663.9 | 12.8 | 43.5 | 2.6 | |||||||||||||||
Total Public | 5,589.4 | 40.0 | 5,183.6 | 39.9 | 405.7 | 7.8 | |||||||||||||||
Other | 1,362.6 | 9.7 | 836.8 | 6.4 | 525.9 | 62.8 | |||||||||||||||
Total Net sales | $ | 13,981.9 | 100.0 | % | $ | 12,988.7 | 100.0 | % | $ | 993.2 | 7.6 | % |
(1) | There were 254 selling days for the years ended December 31, 2016 and 2015. |
(2) | Amounts have been recast to present Small Business as its own operating and reportable segment. |
Years Ended December 31, | |||||||||||||||||
2016 | 2015 | ||||||||||||||||
Dollars in Millions | Operating Margin | Dollars in Millions | Operating Margin | Percent Change in Income from Operations | |||||||||||||
Segments: (1) | |||||||||||||||||
Corporate(2)(6) | $ | 453.6 | 7.7 | % | $ | 432.5 | 7.4 | % | 4.9 | % | |||||||
Small Business(2)(6) | 68.9 | 6.0 | 68.3 | 6.3 | 0.9 | ||||||||||||
Public(2) | 368.0 | 6.6 | 328.6 | 6.3 | 12.0 | ||||||||||||
Other (3)(4) | 43.6 | 3.2 | 27.1 | 3.2 | 60.9 | ||||||||||||
Headquarters (5) | (114.9 | ) | nm* | (114.5 | ) | nm* | 0.3 | ||||||||||
Total Income from operations | $ | 819.2 | 5.9 | % | $ | 742.0 | 5.7 | % | 10.4 | % |
(1) | Segment income from operations includes the segment’s direct operating income, allocations for certain Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors. |
(2) | Certain costs related to technology specialists have been reclassified between our Corporate, Small Business and Public segments. The prior period has been reclassified to conform to the current period presentation. |
(3) | Effective January 1, 2016, CDW Advanced Services is included in our Corporate, Small Business and Public segments and Other is comprised of CDW Canada and CDW UK. The prior period has been reclassified to conform to the current period presentation. |
(4) | Includes the financial results for our other operating segments, CDW Canada and CDW UK, which do not meet the reportable segment quantitative thresholds. |
(5) | Includes Headquarters’ function costs that are not allocated to the segments. Certain Headquarters expenses have been allocated to CDW Canada in 2016. The prior period has been reclassified to conform to the current period presentation. |
(6) | Amounts have been recast to present Small Business as its own operating and reportable segment. |
Month of Extinguishment | Debt Instrument | (in millions) | ||||||||
Amount Extinguished | Loss Recognized | |||||||||
For the Year Ended December 31, 2016 | ||||||||||
August 2016 | Senior Secured Term Loan Facility | $ | 1,490.4 | $ | (2.1 | ) | ||||
Total Loss Recognized | $ | (2.1 | ) | |||||||
For the Year Ended December 31, 2015 | ||||||||||
March 2015 | 2019 Senior Notes | $ | 503.9 | $ | (24.3 | ) | (1) | |||
Total Loss Recognized | $ | (24.3 | ) |
(1) | We repaid all of the remaining aggregate principal amount outstanding. The loss recognized represents the difference between the aggregate principal amount and the net carrying amount of the purchased debt, adjusted for the remaining unamortized deferred financing costs and premium. |
Years Ended December 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Net income | $ | 424.4 | $ | 403.1 | ||||
Amortization of intangibles(1) | 187.2 | 173.9 | ||||||
Non-cash equity-based compensation | 39.2 | 31.2 | ||||||
Non-cash equity-based compensation related to equity investment(2) | — | 20.0 | ||||||
Net loss on extinguishments of long-term debt | 2.1 | 24.3 | ||||||
Acquisition and integration expenses(3) | 7.3 | 10.2 | ||||||
Gain on remeasurement of equity investment(4) | — | (98.1 | ) | |||||
Other adjustments(5) | (5.4 | ) | 3.7 | |||||
Aggregate adjustment for income taxes (6) | (85.8 | ) | (64.8 | ) | ||||
Non-GAAP net income(7) | $ | 569.0 | $ | 503.5 |
(1) | Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. |
(2) | Represents our 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to our acquisition of CDW UK. |
(3) | Comprised of expenses related to CDW UK. |
(4) | Represents the gain resulting from the remeasurement of our previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. |
(5) | Primarily includes our share of settlement payments received from the Dynamic Random Access Memory class action lawsuits and the favorable resolution of a local sales tax matter during the year ended December 31, 2016. Also includes expenses related to the consolidation of office locations north of Chicago during the years ended December 31, 2016 and 2015. |
(6) | Aggregate adjustment for income taxes consists of the following: |
Year Ended December 31, | ||||||||
2016 | 2015 | |||||||
Total Non-GAAP adjustments | 230.4 | 165.2 | ||||||
Weighted-average statutory effective rate | 36.0 | % | 38.0 | % | ||||
Income tax | (82.9 | ) | (62.8 | ) | ||||
Deferred tax adjustment due to law changes | (1.5 | ) | (4.0 | ) | ||||
Stock compensation tax benefit related to the adoption of ASU 2016-09 | (1.8 | ) | — | |||||
Withholding tax expense on the unremitted earnings of our Canadian subsidiary | — | 3.3 | ||||||
Non-deductible adjustments and other | 0.4 | (1.3 | ) | |||||
Total aggregate adjustment for income taxes | $ | (85.8 | ) | $ | (64.8 | ) |
(7) | Includes the impact of consolidating five months of CDW UK's financial results for the year ended December 31, 2015. |
Years Ended December 31, | ||||||||||||
(in millions) | 2016 | Percentage of Net Sales | 2015 | Percentage of Net Sales | ||||||||
Net income | $ | 424.4 | $ | 403.1 | ||||||||
Depreciation and amortization | 254.5 | 227.4 | ||||||||||
Income tax expense | 248.0 | 243.9 | ||||||||||
Interest expense, net | 146.5 | 159.5 | ||||||||||
EBITDA | 1,073.4 | 7.7% | 1,033.9 | 8.0% | ||||||||
Adjustments: | ||||||||||||
Non-cash equity-based compensation | 39.2 | 31.2 | ||||||||||
Net loss on extinguishments of long-term debt | 2.1 | 24.3 | ||||||||||
(Income) loss from equity investments(1) | (1.1 | ) | 10.1 | |||||||||
Acquisition and integration expenses(2) | 7.3 | 10.2 | ||||||||||
Gain on remeasurement of equity investment(3) | — | (98.1 | ) | |||||||||
Other adjustments(4) | (3.6 | ) | 6.9 | |||||||||
Total adjustments | 43.9 | (15.4) | ||||||||||
Adjusted EBITDA(5) | $ | 1,117.3 | 8.0% | $ | 1,018.5 | 7.8% |
(1) | Represents our share of (income) loss from our equity investments. Our 35% share of CDW UK's net loss for the twelve months ended December 31, 2015 includes our 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the acquisition. |
(2) | Comprised of expenses related to CDW UK. |
(3) | Represents the gain resulting from the remeasurement of our previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. |
(4) | Primarily includes our share of settlement payments received from the Dynamic Random Access Memory class action lawsuits and the favorable resolution of a local sales tax matter during the year ended December 31, 2016. Also includes expenses related to the consolidation of office locations north of Chicago during the years ended December 31, 2016 and 2015. |
(5) | Includes the impact of consolidating five months of CDW UK's financial results for the year ended December 31, 2015. |
Years Ended December 31, | |||||||||||||
(in millions) | 2016 | 2015 | % Change | Average Daily % Change(1) | |||||||||
Net sales, as reported | $ | 13,981.9 | $ | 12,988.7 | 7.6 | % | 7.6 | % | |||||
Foreign currency translation (2) | — | (76.3 | ) | ||||||||||
Consolidated Net sales, on a constant currency basis | $ | 13,981.9 | $ | 12,912.4 | 8.3 | % | 8.3 | % |
(1) | There were 254 selling days for the twelve months ended December 31, 2016 and 2015. |
(2) | Represents the effect of translating the prior year results of CDW Canada and CDW UK at the average exchange rates applicable in the current year. Includes the impact of consolidating five months of CDW UK's financial results for the year ended December 31, 2015. |
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||
Dollars in Millions | Percentage of Net Sales | Dollars in Millions | Percentage of Net Sales | |||||||||||
Net sales | $ | 12,988.7 | 100.0 | % | $ | 12,074.5 | 100.0 | % | ||||||
Cost of sales | 10,872.9 | 83.7 | 10,153.2 | 84.1 | ||||||||||
Gross profit | 2,115.8 | 16.3 | 1,921.3 | 15.9 | ||||||||||
Selling and administrative expenses | 1,226.0 | 9.4 | 1,110.3 | 9.2 | ||||||||||
Advertising expense | 147.8 | 1.1 | 138.0 | 1.1 | ||||||||||
Income from operations | 742.0 | 5.7 | 673.0 | 5.6 | ||||||||||
Interest expense, net | (159.5 | ) | (1.2 | ) | (197.3 | ) | (1.6 | ) | ||||||
Net loss on extinguishments of long-term debt | (24.3 | ) | (0.2 | ) | (90.7 | ) | (0.8 | ) | ||||||
Gain on remeasurement of equity investment | 98.1 | 0.8 | — | — | ||||||||||
Other income, net | (9.3 | ) | (0.1 | ) | 2.7 | — | ||||||||
Income before income taxes | 647.0 | 5.0 | 387.7 | 3.2 | ||||||||||
Income tax expense | (243.9 | ) | (1.9 | ) | (142.8 | ) | (1.2 | ) | ||||||
Net income | $ | 403.1 | 3.1 | % | $ | 244.9 | 2.0 | % |
Years Ended December 31, | |||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||
(dollars in millions) | Net Sales | Percentage of Total Net sales | Net Sales | Percentage of Total Net Sales | Dollar Change | Percent Change (1) | |||||||||||||||
Corporate(2) | $ | 5,878.7 | 45.3 | % | $ | 5,541.8 | 45.9 | % | $ | 336.9 | 6.1 | % | |||||||||
Small Business(2) | 1,089.6 | 8.4 | 1,062.2 | 8.8 | 27.4 | 2.6 | |||||||||||||||
Public: | |||||||||||||||||||||
Government | 1,700.9 | 13.1 | 1,475.9 | 12.2 | 225.0 | 15.2 | |||||||||||||||
Education | 1,818.8 | 14.0 | 1,838.7 | 15.2 | (19.9 | ) | (1.1 | ) | |||||||||||||
Healthcare | 1,663.9 | 12.8 | 1,623.7 | 13.4 | 40.2 | 2.5 | |||||||||||||||
Total Public | 5,183.6 | 39.9 | 4,938.3 | 40.9 | 245.3 | 5.0 | |||||||||||||||
Other | 836.8 | 6.4 | 532.2 | 4.4 | 304.6 | 57.2 | |||||||||||||||
Total Net sales | $ | 12,988.7 | 100.0 | % | $ | 12,074.5 | 100.0 | % | $ | 914.2 | 7.6 | % |
(1) | There were 254 selling days for the years ended December 31, 2015 and 2014. |
(2) | Amounts have been recast to present Small Business as its own operating and reportable segment. |
Years Ended December 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
Dollars in Millions | Operating Margin | Dollars in Millions | Operating Margin | Percent Change in Income from Operations | |||||||||||||
Segments: (1) | |||||||||||||||||
Corporate(2) (6) | $ | 432.5 | 7.4 | % | $ | 403.5 | 7.3 | % | 7.2 | % | |||||||
Small Business(2) (6) | 68.3 | 6.3 | 57.1 | 5.4 | 19.6 | ||||||||||||
Public(2) | 328.6 | 6.3 | 303.9 | 6.2 | 8.1 | ||||||||||||
Other(3)(4) | 27.1 | 3.2 | 21.4 | 4.0 | 26.7 | ||||||||||||
Headquarters (5) | (114.5 | ) | nm* | (112.9 | ) | nm* | 1.5 | ||||||||||
Total Income from operations | $ | 742.0 | 5.7 | % | $ | 673.0 | 5.6 | % | 10.3 | % |
(1) | Segment income from operations includes the segment’s direct operating income, allocations for certain Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors. |
(2) | Certain costs related to technology specialists have been reclassified between our Corporate, Small Business and Public segments. The prior period has been reclassified to conform to the current period presentation. |
(3) | Effective January 1, 2016, CDW Advanced Services is included in our Corporate, Small Business and Public segments and Other is comprised of CDW Canada and CDW UK. The prior period has been reclassified to conform to the current period presentation. |
(4) | Includes the financial results for our other operating segments, CDW Canada and CDW UK, which do not meet the reportable segment quantitative thresholds. |
(5) | Includes Headquarters’ function costs that are not allocated to the segments. Certain Headquarters expenses have been allocated to CDW Canada in 2016. The prior period has been reclassified to conform to the current period presentation. |
(6) | Amounts have been recast to present Small Business as its own operating and reportable segment. |
Month of Extinguishment | Debt Instrument | (in millions) | ||||||||
Amount Extinguished | Loss Recognized | |||||||||
For the Year Ended December 31, 2015 | ||||||||||
March 2015 | 2019 Senior Notes | $ | 503.9 | $ | (24.3 | ) | (1) | |||
Total Loss Recognized | $ | (24.3 | ) | |||||||
For the Year Ended December 31, 2014 | ||||||||||
December 2014 | 2019 Senior Notes | $ | 541.4 | $ | (36.9 | ) | (1) | |||
September 2014 | 2019 Senior Notes | 234.7 | (22.1 | ) | (1) | |||||
August 2014 | 8.0% Senior Secured Notes due 2018 | 325.0 | (23.7 | ) | (1) | |||||
June 2014 | Revolving Loan | — | (0.4 | ) | (2) | |||||
May 2014 | 12.535% Senior Subordinated Exchange Notes due 2017 | 42.5 | (2.2 | ) | (1) | |||||
March 2014 | 2019 Senior Notes | 25.0 | (2.7 | ) | (1) | |||||
January and February 2014 | 12.535% Senior Subordinated Exchange Notes due 2017 | 50.0 | (2.7 | ) | (1) | |||||
Total Loss Recognized | $ | (90.7 | ) |
(1) | We redeemed or repurchased all or a portion of the aggregate principal amount outstanding. The loss recognized represents the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs and/or unamortized premium. |
(2) | We entered into a new $1,250 million five-year senior secured asset-based revolving credit facility (the “Revolving Loan”) on June 6, 2014. The Revolving Loan replaced our previous revolving loan credit facility that was to mature on June 24, 2016. The loss recognized represents the write-off of a portion of unamortized deferred financing costs. |
Years Ended December 31, | ||||||||
(in millions) | 2015 | 2014 | ||||||
Net income | $ | 403.1 | $ | 244.9 | ||||
Amortization of intangibles (1) | 173.9 | 161.2 | ||||||
Non-cash equity-based compensation | 31.2 | 16.4 | ||||||
Non-cash equity-based compensation related to equity investment(2) | 20.0 | — | ||||||
Net loss on extinguishments of long-term debt | 24.3 | 90.7 | ||||||
Acquisition and integration expenses(3) | 10.2 | — | ||||||
Gain on remeasurement of equity investment(4) | (98.1 | ) | — | |||||
Other adjustments (5) | 3.7 | (0.3 | ) | |||||
Aggregate adjustment for income taxes (6) | (64.8 | ) | (103.0 | ) | ||||
Non-GAAP net income(7) | $ | 503.5 | $ | 409.9 |
(1) | Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. |
(2) | Represents our 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to our acquisition of CDW UK. |
(3) | Comprised of expenses related to CDW UK. |
(4) | Represents the gain resulting from the remeasurement of our previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. |
(5) | Primarily includes expenses related to the consolidation of office locations north of Chicago and secondary offering-related expenses. |
(6) | Aggregate adjustment for income taxes consists of the following: |
Year Ended December 31, | ||||||||
2015 | 2014 | |||||||
Total Non-GAAP adjustments | 165.2 | 268.0 | ||||||
Weighted-average statutory effective rate | 38.0 | % | 39.0 | % | ||||
Income tax | (62.8 | ) | (104.5 | ) | ||||
Deferred tax adjustment due to law changes | (4.0 | ) | — | |||||
Withholding tax expense on the unremitted earnings of our Canadian subsidiary | 3.3 | — | ||||||
Non-deductible adjustments and other | (1.3 | ) | 1.5 | |||||
Total aggregate adjustment for income taxes | $ | (64.8 | ) | $ | (103.0 | ) |
(7) | Includes the impact of consolidating five months of CDW UK’s financial results for the year ended December 31, 2015. |
Years Ended December 31, | |||||||||||
(in millions) | 2015 | Percentage of Net Sales | 2014 | Percentage of Net Sales | |||||||
Net income | $ | 403.1 | $ | 244.9 | |||||||
Depreciation and amortization | 227.4 | 207.9 | |||||||||
Income tax expense | 243.9 | 142.8 | |||||||||
Interest expense, net | 159.5 | 197.3 | |||||||||
EBITDA | 1,033.9 | 8.0% | 792.9 | 6.6% | |||||||
Adjustments: | |||||||||||
Non-cash equity-based compensation | 31.2 | 16.4 | |||||||||
Net loss on extinguishments of long-term debt | 24.3 | 90.7 | |||||||||
Loss (income) from equity investments(1) | 10.1 | (2.2 | ) | ||||||||
Acquisition and integration expenses(2) | 10.2 | — | |||||||||
Gain on remeasurement of equity investment(3) | (98.1 | ) | — | ||||||||
Other adjustments (4) | 6.9 | 9.2 | |||||||||
Total adjustments | (15.4 | ) | 114.1 | ||||||||
Adjusted EBITDA(5) | $ | 1,018.5 | 7.8% | $ | 907.0 | 7.5% |
(1) | Represents our share of net (income) loss from our equity investments. Our share of CDW UK's net loss includes our 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the acquisition. |
(2) | Comprised of expenses related to CDW UK. |
(3) | Represents the gain resulting from the remeasurement of our previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. |
(4) | Primarily includes certain historical retention costs, unusual, non-recurring litigation matters, secondary-offering-related expenses and expenses related to the consolidation of office locations north of Chicago. |
(5) | Includes the impact of consolidating five months for the year ended December 31, 2015 of CDW UK’s financial results. |
Years Ended December 31, | |||||||||||
(in millions) | 2015 | 2014 | % Change | ||||||||
Net sales, as reported | $ | 12,988.7 | $ | 12,074.5 | 7.6 | % | |||||
Impact of acquisition (1) | (350.7 | ) | — | ||||||||
Organic Net sales | $ | 12,638.0 | $ | 12,074.5 | 4.7 | % | |||||
Foreign currency translation (2) | — | (71.5 | ) | ||||||||
Organic Net sales, on a constant currency basis | $ | 12,638.0 | $ | 12,003.0 | 5.3 | % |
(1) | Represents five months for the year ended December 31, 2015 of CDW UK's financial results. |
(2) | Represents the effect of translating the prior year results of our Canadian subsidiary at the average exchange rates applicable in the current year. |
Dividend Amount | Declaration Date | Record Date | Payment Date | |||
$0.1075 | February 9, 2016 | February 25, 2016 | March 10, 2016 | |||
$0.1075 | May 4, 2016 | May 25, 2016 | June 10, 2016 | |||
$0.1075 | August 2, 2016 | August 25, 2016 | September 12, 2016 | |||
$0.1600 | November 1, 2016 | November 25, 2016 | December 12, 2016 | |||
$0.4825 |
Years Ended December 31, | |||||||||||
(in millions) | 2016 | 2015 | 2014 | ||||||||
Net cash provided by (used in): | |||||||||||
Operating activities | $ | 604.0 | $ | 277.5 | $ | 435.0 | |||||
Investing activities | (65.9 | ) | (354.4 | ) | (164.8 | ) | |||||
Net change in accounts payable - inventory financing | 143.6 | 95.9 | 75.5 | ||||||||
Other financing activities | (448.2 | ) | (322.4 | ) | (187.5 | ) | |||||
Financing activities | (304.6 | ) | (226.5 | ) | (112.0 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (7.4 | ) | (3.5 | ) | (1.8 | ) | |||||
Net increase (decrease) in cash and cash equivalents | $ | 226.1 | $ | (306.9 | ) | $ | 156.4 |
Years Ended December 31, | |||||||||||
(in millions) | 2016 | 2015 | Dollar Change | ||||||||
Net income | $ | 424.4 | $ | 403.1 | $ | 21.3 | |||||
Adjustments for the impact of non-cash items(1) | 202.9 | 150.3 | 52.6 | ||||||||
Net income adjusted for the impact of non-cash items(2) | 627.3 | 553.4 | 73.9 | ||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable(3) | (179.9 | ) | (342.6 | ) | 162.7 | ||||||
Merchandise inventory | (68.5 | ) | (31.5 | ) | (37.0 | ) | |||||
Accounts payable-trade(4) | 225.1 | 100.5 | 124.6 | ||||||||
Other | — | (2.3 | ) | 2.3 | |||||||
Net cash provided by operating activities | $ | 604.0 | $ | 277.5 | $ | 326.5 |
(1) | Includes items such as Deferred income taxes, Depreciation and amortization, Equity-based compensation expense, Gain on remeasurement of equity method investment, Loss from equity method investment and net loss on extinguishments of long-term debt. |
(2) | The change in cash flows reflected stronger operating results driven by Net sales growth and the impact of consolidating a full year of CDW UK financial results in 2016, compared to five months in 2015. |
(3) | The change in cash flows was primarily due to an increase in collections during 2016 due to the higher accounts receivable balance as of December 31, 2015 driven by higher sales in our Public segment where customers generally take longer to pay than customers in our Corporate and Small Business segments. In addition, the lower accounts receivable balances as of December 31, 2014, driven by early payments from certain customers, resulted in lower cash flows in the prior year period. |
(4) | The increase in cash flows was primarily due to the timing of inventory purchases and longer payment terms with certain vendors. |
Years Ended December 31, | |||||||||||
(in millions) | 2015 | 2014 | Dollar Change | ||||||||
Net income | $ | 403.1 | $ | 244.9 | $ | 158.2 | |||||
Adjustments for the impact of non-cash items(1) | 150.3 | 231.9 | (81.6 | ) | |||||||
Net income adjusted for the impact of non-cash items(2) | 553.4 | 476.8 | 76.6 | ||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable(3) | (342.6 | ) | (117.6 | ) | (225.0 | ) | |||||
Merchandise inventory(4) | (31.5 | ) | 44.2 | (75.7 | ) | ||||||
Accounts payable-trade(5) | 100.5 | 43.7 | 56.8 | ||||||||
Other | (2.3 | ) | (12.1 | ) | 9.8 | ||||||
Net cash provided by operating activities | $ | 277.5 | $ | 435.0 | $ | (157.5 | ) |
(1) | Includes items such as Deferred income taxes, Depreciation and amortization, Equity-based compensation expense, Gain on remeasurement of equity method investment, Loss (income) from equity method investment and net loss on extinguishments of long-term debt. |
(2) | The increase in cash flows reflected stronger operating results driven by organic sales growth and the impact of consolidating five months of CDW UK financial results. A decrease in interest expense, partially offset by higher income tax expense, also contributed to the strong operating results. |
(3) | The decrease in cash flows was driven by a higher accounts receivable balance at December 31, 2015 driven by higher sales in our Public segment where customers generally take longer to pay than customers in our Corporate and Small Business segments, slower government payments in certain states due to budget issues and the lower accounts receivable balance at December 31, 2014 driven by early payments from certain customers. |
(4) | The decrease in cash flows was primarily due to the lower inventory balance as of December 31, 2014 as a result of the timing of inventory receipts and earlier than expected inventory shipments at the end of 2014 due to accelerated customer roll-outs and an increase in inventory on-hand as of December 31, 2015 to support the growth in the business. |
(5) | The increase in cash flows was primarily due to the timing of inventory purchases, longer payment terms with certain vendors and growth in the business. |
December 31, | ||||||||
(in days) | 2016 | 2015 | 2014 | |||||
Days of sales outstanding (DSO) (1) | 51 | 48 | 42 | |||||
Days of supply in inventory (DIO) (2) | 12 | 13 | 13 | |||||
Days of purchases outstanding (DPO) (3) | (44 | ) | (40 | ) | (34 | ) | ||
Cash conversion cycle | 19 | 21 | 21 |
(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 Merchandise inventory at the end of the period divided by average daily cost of goods sold 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 goods sold for the same three-month period. |
Payments Due by Period | ||||||||||||||||||||
(in millions) | Total | < 1 year | 1-3 years | 4-5 years | > 5 years | |||||||||||||||
Term Loan (1) | $ | 1,792.3 | $ | 62.9 | $ | 185.8 | $ | 121.5 | $ | 1,422.1 | ||||||||||
CDW UK Term Loan (1) | 74.0 | 1.2 | 21.7 | 51.1 | — | |||||||||||||||
Senior Notes due 2022 (2) | 816.0 | 36.0 | 108.0 | 672.0 | — | |||||||||||||||
Senior Notes due 2023 (2) | 708.8 | 26.3 | 78.8 | 52.5 | 551.2 | |||||||||||||||
Senior Notes due 2024 (2) | 828.0 | 31.6 | 94.9 | 63.3 | 638.2 | |||||||||||||||
Operating leases (3) | 22.6 | 4.9 | 12.1 | 5.6 | — | |||||||||||||||
Asset retirement obligations (4) | 0.9 | — | 0.3 | 0.2 | 0.4 | |||||||||||||||
Total | $ | 4,242.6 | $ | 162.9 | $ | 501.6 | $ | 966.2 | $ | 2,611.9 |
(1) | Includes future principal and cash interest payments on long-term borrowings through scheduled maturity dates. Interest payments for variable rate debt were calculated using interest rates as of December 31, 2016. Excluded from these amounts are the amortization of debt issuance and other costs related to indebtedness. |
(2) | Includes future principal and cash interest payments on long-term borrowings through scheduled maturity dates. Interest on the Senior Notes is calculated using the stated interest rates. Excluded from these amounts are the amortization of debt issuance and other costs related to indebtedness. |
(3) | Includes the minimum lease payments for non-cancelable operating leases of properties and equipment used in our operations. Capital leases included in property and equipment are not material. |
(4) | Represent commitments to return property subject to operating leases to original condition upon lease termination. |
Page | |
/s/ Ernst & Young LLP |
Chicago, Illinois |
February 28, 2017, except for Notes 5 and 16, as to which the date is August 25, 2017 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per-share amounts) | |||||||
December 31, | |||||||
2016 | 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 263.7 | $ | 37.6 | |||
Accounts receivable, net of allowance for doubtful accounts of $5.9 and $6.0, respectively | 2,168.6 | 2,017.4 | |||||
Merchandise inventory | 452.0 | 393.1 | |||||
Miscellaneous receivables | 234.9 | 198.4 | |||||
Prepaid expenses and other | 118.9 | 144.3 | |||||
Total current assets | 3,238.1 | 2,790.8 | |||||
Property and equipment, net | 163.7 | 175.4 | |||||
Goodwill | 2,455.0 | 2,500.4 | |||||
Other intangible assets, net | 1,055.6 | 1,276.4 | |||||
Other assets | 36.0 | 12.3 | |||||
Total Assets | $ | 6,948.4 | $ | 6,755.3 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable-trade | $ | 1,072.9 | $ | 866.5 | |||
Accounts payable-inventory financing | 580.4 | 439.6 | |||||
Current maturities of long-term debt | 18.5 | 27.2 | |||||
Deferred revenue | 172.6 | 151.9 | |||||
Accrued expenses: | |||||||
Compensation | 167.6 | 120.4 | |||||
Interest | 25.1 | 25.1 | |||||
Sales taxes | 38.0 | 38.1 | |||||
Advertising | 55.8 | 52.3 | |||||
Other | 149.8 | 166.2 | |||||
Total current liabilities | 2,280.7 | 1,887.3 | |||||
Long-term liabilities: | |||||||
Debt | 3,215.9 | 3,232.5 | |||||
Deferred income taxes | 369.2 | 469.6 | |||||
Other liabilities | 37.1 | 70.0 | |||||
Total long-term liabilities | 3,622.2 | 3,772.1 | |||||
Commitments and contingencies (Note 14) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.01 par value, 100.0 shares authorized; no shares issued or outstanding for both periods | — | — | |||||
Common stock, $0.01 par value, 1,000.0 shares authorized; 160.3 and 168.2 shares issued and outstanding, respectively | 1.6 | 1.7 | |||||
Paid-in capital | 2,857.3 | 2,806.9 | |||||
Accumulated deficit | (1,673.8 | ) | (1,651.6 | ) | |||
Accumulated other comprehensive loss | (139.6 | ) | (61.1 | ) | |||
Total stockholders’ equity | 1,045.5 | 1,095.9 | |||||
Total Liabilities and Stockholders’ Equity | $ | 6,948.4 | $ | 6,755.3 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) | |||||||||||
Years Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Net sales | $ | 13,981.9 | $ | 12,988.7 | $ | 12,074.5 | |||||
Cost of sales | 11,654.7 | 10,872.9 | 10,153.2 | ||||||||
Gross profit | 2,327.2 | 2,115.8 | 1,921.3 | ||||||||
Selling and administrative expenses | 1,345.1 | 1,226.0 | 1,110.3 | ||||||||
Advertising expense | 162.9 | 147.8 | 138.0 | ||||||||
Income from operations | 819.2 | 742.0 | 673.0 | ||||||||
Interest expense, net | (146.5 | ) | (159.5 | ) | (197.3 | ) | |||||
Net loss on extinguishments of long-term debt | (2.1 | ) | (24.3 | ) | (90.7 | ) | |||||
Gain on remeasurement of equity investment | — | 98.1 | — | ||||||||
Other income (expense), net | 1.8 | (9.3 | ) | 2.7 | |||||||
Income before income taxes | 672.4 | 647.0 | 387.7 | ||||||||
Income tax expense | (248.0 | ) | (243.9 | ) | (142.8 | ) | |||||
Net income | $ | 424.4 | $ | 403.1 | $ | 244.9 | |||||
Net income per common share: | |||||||||||
Basic | $ | 2.59 | $ | 2.37 | $ | 1.44 | |||||
Diluted | $ | 2.56 | $ | 2.35 | $ | 1.42 | |||||
Weighted-average common shares outstanding: | |||||||||||
Basic | 163.6 | 170.3 | 170.6 | ||||||||
Diluted | 166.0 | 171.8 | 172.8 | ||||||||
Cash dividends declared per common share | $ | 0.4825 | $ | 0.3100 | $ | 0.1950 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) | ||||||||||||
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Net income | $ | 424.4 | $ | 403.1 | $ | 244.9 | ||||||
Foreign currency translation (net of tax (expense) benefit of ($0.2) million, ($0.3) million and $0.5 million, respectively) | (78.5 | ) | (44.5 | ) | (10.3 | ) | ||||||
Other comprehensive loss, net of tax | (78.5 | ) | (44.5 | ) | (10.3 | ) | ||||||
Comprehensive income | $ | 345.9 | $ | 358.6 | $ | 234.6 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions) | ||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Total Stockholders’ Equity | |||||||||||||||||||||||
Balance at December 31, 2013 | — | $ | — | 172.0 | $ | 1.7 | $ | 2,688.1 | $ | (1,971.8 | ) | $ | (6.3 | ) | $ | 711.7 | ||||||||||||||
Equity-based compensation expense | — | — | — | — | 16.4 | — | — | 16.4 | ||||||||||||||||||||||
Stock option exercises | — | — | — | — | 1.3 | — | — | 1.3 | ||||||||||||||||||||||
Excess tax benefits from equity-based compensation | — | — | — | — | 0.3 | — | — | 0.3 | ||||||||||||||||||||||
Coworker stock purchase plan | — | — | 0.2 | — | 5.8 | — | — | 5.8 | ||||||||||||||||||||||
Dividends paid | — | — | — | — | — | (33.6 | ) | — | (33.6 | ) | ||||||||||||||||||||
Net income | — | — | — | — | — | 244.9 | — | 244.9 | ||||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | (10.3 | ) | (10.3 | ) | ||||||||||||||||||||
Balance at December 31, 2014 | — | $ | — | 172.2 | $ | 1.7 | $ | 2,711.9 | $ | (1,760.5 | ) | $ | (16.6 | ) | $ | 936.5 | ||||||||||||||
Equity-based compensation expense | — | — | — | — | 28.3 | — | — | 28.3 | ||||||||||||||||||||||
Stock option exercises | — | — | 0.1 | — | 2.4 | — | — | 2.4 | ||||||||||||||||||||||
Common stock issued for equity-based compensation | — | — | 0.3 | — | — | — | — | — | ||||||||||||||||||||||
Excess tax benefits from equity-based compensation | — | — | — | — | 0.6 | — | — | 0.6 | ||||||||||||||||||||||
Coworker stock purchase plan | — | — | 0.3 | — | 8.7 | — | — | 8.7 | ||||||||||||||||||||||
Common stock issued for acquisition of business | — | — | 1.6 | — | 55.0 | — | — | 55.0 | ||||||||||||||||||||||
Dividends paid | — | — | — | — | — | (52.9 | ) | — | (52.9 | ) | ||||||||||||||||||||
Net income | — | — | — | — | — | 403.1 | — | 403.1 | ||||||||||||||||||||||
Repurchases of common stock | — | — | (6.3 | ) | — | — | (241.3 | ) | — | (241.3 | ) | |||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | (44.5 | ) | (44.5 | ) | ||||||||||||||||||||
Balance at December 31, 2015 | — | $ | — | 168.2 | $ | 1.7 | $ | 2,806.9 | $ | (1,651.6 | ) | $ | (61.1 | ) | $ | 1,095.9 | ||||||||||||||
Equity-based compensation expense | — | — | — | — | 33.2 | — | — | 33.2 | ||||||||||||||||||||||
Stock option exercises | — | — | 0.4 | — | 7.4 | — | — | 7.4 | ||||||||||||||||||||||
Common stock issued for equity-based compensation | — | — | 0.2 | — | — | — | — | — | ||||||||||||||||||||||
Coworker Stock Purchase Plan | — | — | 0.2 | — | 9.3 | — | — | 9.3 | ||||||||||||||||||||||
Dividends paid | — | — | — | — | 0.5 | (79.2 | ) | — | (78.7 | ) | ||||||||||||||||||||
Net income | — | — | — | — | — | 424.4 | — | 424.4 | ||||||||||||||||||||||
Repurchases of common stock | — | — | (8.7 | ) | (0.1 | ) | — | (367.4 | ) | — | (367.5 | ) | ||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | (78.5 | ) | (78.5 | ) | ||||||||||||||||||||
Balance as of December 31, 2016 | — | $ | — | 160.3 | $ | 1.6 | $ | 2,857.3 | $ | (1,673.8 | ) | $ | (139.6 | ) | $ | 1,045.5 |
CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | |||||||||||
Years Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 424.4 | $ | 403.1 | $ | 244.9 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 254.5 | 227.4 | 207.9 | ||||||||
Equity-based compensation expense | 39.2 | 31.2 | 16.4 | ||||||||
Deferred income taxes | (97.2 | ) | (54.5 | ) | (89.1 | ) | |||||
Amortization of deferred financing costs, debt premium and debt discount, net | 6.5 | 6.4 | 6.4 | ||||||||
Net loss on extinguishments of long-term debt | 2.1 | 24.3 | 90.7 | ||||||||
Loss (income) from equity investments | — | 11.2 | (1.2 | ) | |||||||
Gain on remeasurement of equity investment | — | (98.1 | ) | — | |||||||
Mark-to-market (gain) loss on interest rate cap agreements | (2.6 | ) | 2.1 | 0.4 | |||||||
Other | 0.4 | 0.3 | 0.4 | ||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | (179.9 | ) | (342.6 | ) | (117.6 | ) | |||||
Merchandise inventory | (68.5 | ) | (31.5 | ) | 44.2 | ||||||
Other assets | (50.1 | ) | (71.2 | ) | (18.7 | ) | |||||
Accounts payable-trade | 225.1 | 100.5 | 43.7 | ||||||||
Other current liabilities | 80.2 | 47.5 | 1.7 | ||||||||
Long-term liabilities | (30.1 | ) | 21.4 | 4.9 | |||||||
Net cash provided by operating activities | 604.0 | 277.5 | 435.0 | ||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (63.5 | ) | (90.1 | ) | (55.0 | ) | |||||
Payment for equity investment | — | — | (86.8 | ) | |||||||
Payment of accrued charitable contribution related to the MPK Coworker Incentive Plan II | — | — | (20.9 | ) | |||||||
Premium payments on interest rate cap agreements | (2.4 | ) | (0.5 | ) | (2.1 | ) | |||||
Acquisition of business, net of cash acquired | — | (263.8 | ) | — | |||||||
Net cash used in investing activities | (65.9 | ) | (354.4 | ) | (164.8 | ) | |||||
Cash flows from financing activities: | |||||||||||
Proceeds from borrowings under revolving credit facility | 338.8 | 314.5 | — | ||||||||
Repayments of borrowings under revolving credit facility | (338.8 | ) | (314.5 | ) | — | ||||||
Repayments of long-term debt | (20.6 | ) | (32.8 | ) | (15.4 | ) | |||||
Proceeds from issuance of long-term debt | 1,483.0 | 525.0 | 1,175.0 | ||||||||
Payments to extinguish long-term debt | (1,490.4 | ) | (525.3 | ) | (1,299.0 | ) | |||||
Net change in other long-term obligation | 15.7 | — | — | ||||||||
Payments of debt financing costs | (5.9 | ) | (6.8 | ) | (21.9 | ) | |||||
Net change in accounts payable-inventory financing | 143.6 | 95.9 | 75.5 | ||||||||
Proceeds from stock option exercises | 7.4 | 2.4 | 1.3 | ||||||||
Proceeds from Coworker Stock Purchase Plan | 9.3 | 8.7 | 5.8 | ||||||||
Repurchases of common stock | (367.4 | ) | (241.3 | ) | — | ||||||
Dividends paid | (78.7 | ) | (52.9 | ) | (33.6 | ) | |||||
Excess tax benefits from equity-based compensation | — | 0.6 | 0.3 | ||||||||
Principal payments under capital lease obligations | (0.6 | ) | — | — | |||||||
Net cash used in financing activities | (304.6 | ) | (226.5 | ) | (112.0 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (7.4 | ) | (3.5 | ) | (1.8 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 226.1 | (306.9 | ) | 156.4 | |||||||
Cash and cash equivalents – beginning of period | 37.6 | 344.5 | 188.1 | ||||||||
Cash and cash equivalents – end of period | $ | 263.7 | $ | 37.6 | $ | 344.5 | |||||
Supplementary disclosure of cash flow information: | |||||||||||
Interest paid | $ | (144.3 | ) | $ | (154.6 | ) | $ | (195.8 | ) | ||
Taxes paid, net | $ | (329.2 | ) | $ | (300.2 | ) | $ | (241.2 | ) | ||
1. | Description of Business and Summary of Significant Accounting Policies |
Classification | Estimated Useful Lives |
Machinery and equipment | 5 to 10 years |
Building and leasehold improvements | 4 to 25 years |
Computer and data processing equipment | 3 to 5 years |
Computer software | 3 to 5 years |
Furniture and fixtures | 4 to 10 years |
Classification | Estimated Useful Lives |
Customer relationships and contracts | 3 to 14 years |
Trade name | generally 20 years |
Internally developed software | 2 to 5 years |
Other | 1 to 10 years |
Years Ended December 31, | ||||||||||||
(in millions) | 2016 | 2015 | 2014 | |||||||||
Foreign currency translation | $ | (139.6 | ) | $ | (61.1 | ) | $ | (16.6 | ) | |||
Accumulated other comprehensive loss | $ | (139.6 | ) | $ | (61.1 | ) | $ | (16.6 | ) |
2. | Recent Accounting Pronouncements |
3. | Acquisition |
(in millions) | Acquisition-Date Fair Value | |||
Cash | $ | 291.6 | ||
Fair value of CDW common stock (1) | 33.2 | |||
Fair value of previously held equity investment on the date of acquisition (2) | 174.9 | |||
Total consideration | $ | 499.7 |
(1) | The Company issued 2 million shares of CDW common stock. The fair value of the common stock was based on the closing market price on July 31, 2015, adjusted for the lack of marketability as the shares of CDW common stock issued to certain sellers are subject to a three-year lock up restriction from August 1, 2015. One of the sellers granted 1 million stock options to certain CDW UK coworkers over his shares of CDW common stock received in the transaction. The fair value of these stock options was $22 million, which has been accounted for as post-combination stock-based compensation and is being amortized over the weighted-average requisite service period of 3.2 years and recorded in Selling and administrative expenses in the Consolidated Statements of Operations. |
(2) | As a result of the Company obtaining control over CDW UK, the Company’s previously held 35% equity investment was remeasured to fair value, resulting in a gain of $98 million included in Gain on remeasurement of equity investment in the Consolidated Statements of Operations. The fair value of the previously held equity investment was determined by management with the assistance of a third party valuation firm, based on information available at the acquisition date. |
(in millions) | Acquisition-Date Fair Value (1) | |||
Cash | $ | 27.8 | ||
Accounts receivable | 135.7 | |||
Merchandise inventory | 27.1 | |||
Property and equipment, net | 11.4 | |||
Identified intangible assets (2) | 289.8 | |||
Other assets | 53.5 | |||
Total assets acquired | 545.3 | |||
Accounts payable (3) | (86.1 | ) | ||
Deferred revenue | (57.2 | ) | ||
Other liabilities | (41.7 | ) | ||
Deferred tax liabilities | (55.1 | ) | ||
Debt | (111.5 | ) | ||
Total liabilities assumed | (351.6 | ) | ||
Total identifiable net assets | 193.7 | |||
Goodwill | 306.0 | |||
Total purchase price | $ | 499.7 |
(1) | The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. |
(2) | Details of the identified intangible assets acquired are as follows: |
(in millions) | Acquisition-Date Fair Value | Weighted-Average Amortization Period (in years) | |||
Customer relationships | $ | 260.8 | 13 | ||
Customer contracts | 25.9 | 3 | |||
Developed technology | 1.7 | 2 | |||
Trade name | 1.4 | 1 | |||
Total identified intangible assets | $ | 289.8 |
(3) | Accounts payable includes both Accounts payable-trade and Accounts payable-inventory financing. |
Years Ended December 31, | ||||||||
(in millions) | 2015 | 2014 | ||||||
Net sales | $ | 13,507.6 | $ | 12,933.1 | ||||
Net income | 363.7 | 243.1 |
(1) | Excludes acquisition and integration expenses directly related to the transaction. |
(2) | Includes additional amortization expense related to the fair value of acquired intangibles. |
(3) | Excludes the gain of resulting from the remeasurement of the Company’s previously held 35% equity investment to fair value upon the completion of the acquisition. |
(4) | Excludes the Company’s share of net income/loss from its previously held 35% equity investment prior to the completion of the acquisition. |
(5) | Excludes non-cash equity-based compensation related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the completion of the acquisition. |
(6) | Includes additional non-cash equity-based compensation related to equity awards granted to CDW UK coworkers after the completion of the acquisition. |
(7) | Includes the elimination of inter-company sales transactions prior to the completion of the acquisition. |
4. | Property and Equipment |
December 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Land | $ | 27.7 | $ | 27.7 | ||||
Machinery and equipment | 43.2 | 56.8 | ||||||
Building and leasehold improvements | 120.4 | 126.7 | ||||||
Computer and data processing equipment | 101.7 | 99.6 | ||||||
Computer software | 10.8 | 10.3 | ||||||
Furniture and fixtures | 23.8 | 29.4 | ||||||
Construction in progress | 20.4 | 23.9 | ||||||
Property and equipment | 348.0 | 374.4 | ||||||
Less: accumulated depreciation | (184.3 | ) | (199.0 | ) | ||||
Property and equipment, net | $ | 163.7 | $ | 175.4 |
5. | Goodwill and Other Intangible Assets |
(in millions) | Corporate(4) | Small Business(4) | Public | Other (1) | Consolidated | |||||||||||||||
Balances as of December 31, 2014: | ||||||||||||||||||||
Goodwill | $ | 2,617.3 | $ | 185.9 | $ | 1,265.4 | $ | 102.8 | $ | 4,171.4 | ||||||||||
Accumulated impairment charges | (1,571.4 | ) | — | (354.1 | ) | (28.3 | ) | (1,953.8 | ) | |||||||||||
1,045.9 | 185.9 | 911.3 | 74.5 | 2,217.6 | ||||||||||||||||
2015 Activity: | ||||||||||||||||||||
Foreign currency translation | — | — | — | (22.4 | ) | (22.4 | ) | |||||||||||||
Acquisition (2) | — | — | — | 305.2 | 305.2 | |||||||||||||||
— | — | — | 282.8 | 282.8 | ||||||||||||||||
Balances as of December 31, 2015: | ||||||||||||||||||||
Goodwill | 2,617.3 | 185.9 | 1,265.4 | 385.6 | 4,454.2 | |||||||||||||||
Accumulated impairment charges | (1,571.4 | ) | — | (354.1 | ) | (28.3 | ) | (1,953.8 | ) | |||||||||||
1,045.9 | 185.9 | 911.3 | 357.3 | 2,500.4 | ||||||||||||||||
2016 Activity: | ||||||||||||||||||||
Foreign currency translation | — | — | — | (45.4 | ) | (45.4 | ) | |||||||||||||
CDW Advanced Services Allocation(3) | 28.2 | — | 18.3 | (46.5 | ) | — | ||||||||||||||
28.2 | — | 18.3 | (91.9 | ) | (45.4 | ) | ||||||||||||||
Balances as of December 31, 2016: | ||||||||||||||||||||
Goodwill | 2,645.5 | 185.9 | 1,283.7 | 293.7 | 4,408.8 | |||||||||||||||
Accumulated impairment charges | (1,571.4 | ) | — | (354.1 | ) | (28.3 | ) | (1,953.8 | ) | |||||||||||
$ | 1,074.1 | $ | 185.9 | $ | 929.6 | $ | 265.4 | $ | 2,455.0 |
(1) | Other is comprised of Canada and CDW UK reporting units. |
(2) | For further information regarding the addition to goodwill resulting from the Company’s acquisition of CDW UK, see Note 3 (Acquisition). |
(3) | Effective January 1, 2016, the CDW Advanced Services business is included in the Company's Corporate, Small Business and Public segments. |
(4) | Amounts have been recast to present Small Business as its own operating and reportable segment. |
(in millions) | ||||||||||||
December 31, 2016 | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
Customer relationships and contracts | $ | 2,084.6 | $ | (1,322.7 | ) | $ | 761.9 | |||||
Trade name | 422.1 | (195.2 | ) | 226.9 | ||||||||
Internally developed software | 142.6 | (77.7 | ) | 64.9 | ||||||||
Other | 6.0 | (4.1 | ) | 1.9 | ||||||||
Total | $ | 2,655.3 | $ | (1,599.7 | ) | $ | 1,055.6 | |||||
December 31, 2015 | ||||||||||||
Customer relationships | $ | 2,128.3 | $ | (1,162.0 | ) | $ | 966.3 | |||||
Trade name | 422.3 | (173.9 | ) | 248.4 | ||||||||
Internally developed software | 136.5 | (77.7 | ) | 58.8 | ||||||||
Other | 5.8 | (2.9 | ) | 2.9 | ||||||||
Total | $ | 2,692.9 | $ | (1,416.5 | ) | $ | 1,276.4 |
(in millions) | ||||
Years ending December 31, | Estimated Future Amortization Expense | |||
2017 | $ | 213.7 | ||
2018 | 198.9 | |||
2019 | 181.4 | |||
2020 | 154.1 | |||
2021 | 70.8 |
6. | Inventory Financing Agreements |
December 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Revolving Loan inventory financing agreement | $ | 558.3 | $ | 427.0 | ||||
Other inventory financing agreements | 22.1 | 12.6 | ||||||
Accounts payable-inventory financing | $ | 580.4 | $ | 439.6 |
7. | Lease Commitments |
(in millions) | ||||
Years ending December 31, | Future Minimum Lease Payments | |||
2017 | $ | 22.9 | ||
2018 | 21.0 | |||
2019 | 20.6 | |||
2020 | 20.0 | |||
2021 | 13.7 | |||
Thereafter | 42.1 | |||
Total future minimum lease payments | $ | 140.3 |
8. | Long-Term Debt |
(dollars in millions) | Interest Rate | Principal | Unamortized Discount, Premium, and Deferred Financing Costs | Total | |||||||||||
Year Ended December 31, 2016 | |||||||||||||||
Senior secured asset-based revolving credit facility | — | % | $ | — | $ | — | $ | — | |||||||
CDW UK revolving credit facility | — | % | — | — | — | ||||||||||
Senior secured term loan facility | 3.3 | % | 1,483.0 | (14.9 | ) | 1,468.1 | |||||||||
CDW UK term loan | 1.8 | % | 69.1 | (1.6 | ) | 67.5 | |||||||||
Senior notes due August 15, 2022 | 6.0 | % | 600.0 | (5.6 | ) | 594.4 | |||||||||
Senior notes due September 1, 2023 | 5.0 | % | 525.0 | (5.3 | ) | 519.7 | |||||||||
Senior notes due December 1, 2024 | 5.5 | % | 575.0 | (6.0 | ) | 569.0 | |||||||||
Other long-term obligations | 15.7 | — | 15.7 | ||||||||||||
Total long-term debt | 3,267.8 | (33.4 | ) | 3,234.4 | |||||||||||
Less current maturities of long-term debt | (18.5 | ) | — | (18.5 | ) | ||||||||||
Long-term debt, excluding current maturities | $ | 3,249.3 | $ | (33.4 | ) | $ | 3,215.9 | ||||||||
Year Ended December 31, 2015 | |||||||||||||||
Senior secured asset-based revolving credit facility | — | % | $ | — | $ | — | $ | — | |||||||
CDW UK revolving credit facility | — | % | — | — | — | ||||||||||
Senior secured term loan facility | 3.3 | % | 1,498.1 | (6.7 | ) | 1,491.4 | |||||||||
CDW UK term loan | 2.0 | % | 88.4 | (0.6 | ) | 87.8 | |||||||||
Senior notes due August 15, 2022 | 6.0 | % | 600.0 | (6.6 | ) | 593.4 | |||||||||
Senior notes due September 1, 2023 | 5.0 | % | 525.0 | (6.2 | ) | 518.8 | |||||||||
Senior notes due December 1, 2024 | 5.5 | % | 575.0 | (6.7 | ) | 568.3 | |||||||||
Total long-term debt | 3,286.5 | (26.8 | ) | 3,259.7 | |||||||||||
Less current maturities of long-term debt | (27.2 | ) | — | (27.2 | ) | ||||||||||
Long-term debt, excluding current maturities | $ | 3,259.3 | $ | (26.8 | ) | $ | 3,232.5 |
(in millions) | ||||
Years ending December 31, | ||||
2017 | 18.4 | |||
2018 | 24.8 | |||
2019 | 25.1 | |||
2020 | 25.3 | |||
2021 | 65.4 | |||
Thereafter | 3,108.8 | |||
$ | 3,267.8 |
December 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Fair value | $ | 3,334.8 | $ | 3,330.4 | ||||
Carrying value | 3,267.8 | 3,286.5 |
9. | Income Taxes |
Years Ended December 31, | ||||||||||||
(in millions) | 2016 | 2015 | 2014 | |||||||||
Domestic | $ | 635.5 | $ | 626.4 | $ | 366.6 | ||||||
Foreign | 36.9 | 20.6 | 21.1 | |||||||||
Total | $ | 672.4 | $ | 647.0 | $ | 387.7 |
Years Ended December 31, | ||||||||||||
(in millions) | 2016 | 2015 | 2014 | |||||||||
Current: | ||||||||||||
Federal | $ | 295.7 | $ | 258.5 | $ | 206.8 | ||||||
State | 34.9 | 28.6 | 19.3 | |||||||||
Foreign | 16.8 | 10.1 | 5.8 | |||||||||
Total current | 347.4 | 297.2 | 231.9 | |||||||||
Deferred: | ||||||||||||
Domestic | (90.5 | ) | (48.5 | ) | (89.0 | ) | ||||||
Foreign | (8.9 | ) | (4.8 | ) | (0.1 | ) | ||||||
Total deferred | (99.4 | ) | (53.3 | ) | (89.1 | ) | ||||||
Income tax expense | $ | 248.0 | $ | 243.9 | $ | 142.8 |
Years Ended December 31, | |||||||||||||||||||||
(dollars in millions) | 2016 | 2015 | 2014 | ||||||||||||||||||
Statutory federal income tax rate | $ | 235.4 | 35.0 | % | $ | 226.4 | 35.0 | % | $ | 135.7 | 35.0 | % | |||||||||
State taxes, net of federal effect | 17.8 | 2.6 | 16.5 | 2.6 | 6.5 | 1.6 | |||||||||||||||
Tax benefit of equity awards | (1.6 | ) | (0.2 | ) | — | — | — | — | |||||||||||||
Effect of rates different than statutory | (4.5 | ) | (0.7 | ) | (1.9 | ) | (0.3 | ) | (1.9 | ) | (0.5 | ) | |||||||||
Foreign withholding tax | 0.8 | 0.1 | 3.3 | 0.5 | — | — | |||||||||||||||
Effect of UK tax rate change on deferred taxes | (1.5 | ) | (0.2 | ) | (4.0 | ) | (0.6 | ) | — | — | |||||||||||
Other | 1.6 | 0.3 | 3.6 | 0.5 | 2.5 | 0.7 | |||||||||||||||
Effective tax rate | $ | 248.0 | 36.9 | % | $ | 243.9 | 37.7 | % | $ | 142.8 | 36.8 | % |
December 31, | ||||||||
(in millions) | 2016 | 2015 | ||||||
Deferred tax assets: | ||||||||
Equity compensation plans | $ | 29.2 | $ | 17.0 | ||||
Payroll and benefits | 22.7 | 21.2 | ||||||
Deferred interest | 13.9 | 25.0 | ||||||
Net operating loss and credit carryforwards, net | 12.7 | 14.1 | ||||||
Rent | 11.0 | 10.8 | ||||||
Accounts receivable | 8.3 | 6.4 | ||||||
Other | 6.2 | 5.9 | ||||||
Trade credits | 0.6 | 1.5 | ||||||
Total deferred tax assets | 104.6 | 101.9 | ||||||
Deferred tax liabilities: | ||||||||
Software and intangibles | 337.4 | 411.0 | ||||||
Deferred income | 58.3 | 87.3 | ||||||
International investments | 31.3 | 30.4 | ||||||
Property and equipment | 30.3 | 30.6 | ||||||
Other | 15.3 | 17.3 | ||||||
Total deferred tax liabilities | 472.6 | 576.6 | ||||||
Deferred tax asset valuation allowance | 1.2 | — | ||||||
Net deferred tax liabilities | $ | 369.2 | $ | 474.7 |
10. | Stockholders’ Equity |
Secondary Offering Shares | Completion Date of Secondary Offering | Overallotment Shares(1) | Completion Date of Overallotment Shares | |||||
10,000,000 | 3/12/2014 | 1,500,000 | 3/12/2014 | |||||
15,000,000 | 5/28/2014 | 2,250,000 | 6/4/2014 | |||||
15,000,000 | 9/8/2014(2) | — | — | |||||
15,000,000 | 12/8/2014 | 2,250,000 | 12/8/2014 | |||||
10,000,000 | 5/22/2015 | 1,500,000 | 5/22/2015 | |||||
11,250,000 | 8/18/2015 | 1,687,500 | 8/18/2015 | |||||
8,000,000 | 11/30/2015 | 1,200,000 | 12/9/2015 |
(1) | Under each underwriting agreement, the selling stockholders granted the underwriters an option, exercisable for thirty days, to purchase up to the additional amount of shares noted. |
(2) | The option to purchase additional shares was not exercised in connection with the September 2014 secondary offering. |
11. | Equity-Based Compensation |
Years Ended December 31, | ||||||||||||
(in millions) | 2016 | 2015 | 2014 | |||||||||
Equity-based compensation expense | $ | 39.2 | $ | 31.2 | $ | 16.4 | ||||||
Income tax benefit | (13.3 | ) | (10.9 | ) | (5.1 | ) | ||||||
Equity-based compensation expense (net of tax) | $ | 25.9 | $ | 20.3 | $ | 11.3 |
Years Ended December 31, | ||||||||||||
2016 | 2015 | 2014 | ||||||||||
Grant date fair value | $ | 8.55 | $ | 11.13 | $ | 7.23 | ||||||
Volatility (1) | 25.00 | % | 30.00 | % | 30.00 | % | ||||||
Risk-free rate (2) | 1.47 | % | 1.75 | % | 1.77 | % | ||||||
Expected dividend yield | 1.08 | % | 0.72 | % | 0.70 | % | ||||||
Expected term (in years) (3) | 6.0 | 6.0 | 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 US Treasury rate. |
(3) | Calculated using the simplified method, which 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. |
Options | Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (millions) | |||||||||
Outstanding at January 1, 2016 | 3,197,221 | $ | 25.58 | ||||||||||
Granted | 956,280 | 39.99 | |||||||||||
Forfeited/Expired | (48,166 | ) | 32.87 | ||||||||||
Exercised (1) | (324,284 | ) | 22.90 | ||||||||||
Outstanding at December 31, 2016 | 3,781,051 | $ | 29.36 | 7.4 | $ | 85.9 | |||||||
Exercisable at December 31, 2016 | 1,729,243 | $ | 22.82 | 6.4 | $ | 50.6 | |||||||
Vested and expected to vest at December 31, 2016 | 2,025,415 | $ | 34.84 | 8.3 | $ | 34.9 |
Number of Units | Weighted-Average Grant-Date Fair Value | ||||||
Nonvested at January 1, 2016 | 1,257,399 | $ | 19.19 | ||||
Granted (1) | 35,392 | 39.82 | |||||
Vested (2) | (32,250 | ) | 31.34 | ||||
Forfeited | (81,053 | ) | 17.05 | ||||
Nonvested at December 31, 2016 | 1,179,488 | $ | 19.52 |
(1) | The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2016, 2015 and 2014 was $39.82, $36.24 and $24.29, respectively. |
(2) | The aggregate fair value of RSUs that vested during the years ended December 31, 2016, 2015 and 2014 was $1 million, $1 million and less than $1 million, respectively. |
12. | Earnings Per Share |
Years Ended December 31, | |||||||||
(in millions) | 2016 | 2015 | 2014 | ||||||
Basic weighted-average shares outstanding | 163.6 | 170.3 | 170.6 | ||||||
Effect of dilutive securities (1) | 2.4 | 1.5 | 2.2 | ||||||
Diluted weighted-average shares outstanding (2) | 166.0 | 171.8 | 172.8 |
(1) | The dilutive effect of outstanding stock options, restricted stock units, restricted stock, performance share units and Coworker Stock Purchase Plan units is reflected in the diluted weighted-average shares outstanding using the treasury stock method. |
(2) | There were less than 1 million potential common shares excluded from diluted weighted-average shares outstanding for the years ended December 31, 2016, 2015 and 2014, respectively, as their inclusion would have had an anti-dilutive effect. |
13. | Coworker Retirement and Other Compensation Benefits |
(in millions) | Corporate(1) | Small Business(1) | Public | Other | Headquarters | Total | |||||||||||||||||
2016: | |||||||||||||||||||||||
Net sales | $ | 5,889.8 | $ | 1,140.1 | $ | 5,589.4 | $ | 1,362.6 | $ | — | $ | 13,981.9 | |||||||||||
Income (loss) from operations | 453.6 | 68.9 | 368.0 | 43.6 | (114.9 | ) | 819.2 | ||||||||||||||||
Depreciation and amortization expense | (82.9 | ) | (20.6 | ) | (44.7 | ) | (32.1 | ) | (74.2 | ) | (254.5 | ) | |||||||||||
2015: | |||||||||||||||||||||||
Net sales | $ | 5,878.7 | $ | 1,089.6 | $ | 5,183.6 | $ | 836.8 | $ | — | $ | 12,988.7 | |||||||||||
Income (loss) from operations | 432.5 | 68.3 | 328.6 | 27.1 | (114.5 | ) | 742.0 | ||||||||||||||||
Depreciation and amortization expense | (82.6 | ) | (20.6 | ) | (44.7 | ) | (16.2 | ) | (63.3 | ) | (227.4 | ) | |||||||||||
2014: | |||||||||||||||||||||||
Net sales | $ | 5,541.8 | $ | 1,062.2 | $ | 4,938.3 | $ | 532.2 | $ | — | $ | 12,074.5 | |||||||||||
Income (loss) from operations | 403.5 | 57.1 | 303.9 | $ | 21.4 | (112.9 | ) | 673.0 | |||||||||||||||
Depreciation and amortization expense | (81.7 | ) | (20.8 | ) | (44.7 | ) | $ | (1.7 | ) | (59.0 | ) | (207.9 | ) |
Year Ended December 31, 2016 | Year Ended December 31, 2015(1) | Year Ended December 31, 2014(1) | ||||||||||||||||||
Dollars in Millions | Percentage of Total Net Sales | Dollars in Millions | Percentage of Total Net Sales | Dollars in Millions | Percentage of Total Net Sales | |||||||||||||||
Notebooks/Mobile Devices | $ | 2,934.3 | 21.0 | % | $ | 2,538.5 | 19.5 | % | $ | 2,352.9 | 19.5 | % | ||||||||
Netcomm Products | 1,950.9 | 14.0 | 1,912.3 | 14.7 | 1,613.9 | 13.4 | ||||||||||||||
Desktops | 1,054.8 | 7.5 | 968.6 | 7.5 | 1,058.2 | 8.8 | ||||||||||||||
Enterprise and Data Storage (Including Drives) | 1,057.6 | 7.6 | 1,065.5 | 8.2 | 1,023.9 | 8.5 | ||||||||||||||
Other Hardware | 3,981.4 | 28.5 | 3,798.3 | 29.2 | 3,492.3 | 28.8 | ||||||||||||||
Software(2) | 2,406.9 | 17.2 | 2,161.3 | 16.6 | 2,065.8 | 17.1 | ||||||||||||||
Services(2) | 579.0 | 4.1 | 472.8 | 3.6 | 371.1 | 3.1 | ||||||||||||||
Other (3) | 17.0 | 0.1 | 71.4 | 0.7 | 96.4 | 0.8 | ||||||||||||||
Total Net sales | $ | 13,981.9 | 100.0 | % | $ | 12,988.7 | 100.0 | % | $ | 12,074.5 | 100.0 | % |
(1) | Amounts have been reclassified for changes in individual product classifications to conform to the presentation for the year ended December 31, 2016. |
(2) | Certain software and services revenue is recorded on a net basis for accounting purposes, so the category percentage of net revenues is not representative of the category percentage of gross profits. |
(3) | Includes items such as delivery charges to customers and certain commission revenue. |
Condensed Consolidating Balance Sheet | |||||||||||||||||||||||||||
December 31, 2016 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 222.7 | $ | 3.1 | $ | 37.9 | $ | — | $ | — | $ | 263.7 | |||||||||||||
Accounts receivable, net | — | — | 1,904.9 | 263.7 | — | — | 2,168.6 | ||||||||||||||||||||
Merchandise inventory | — | — | 390.6 | 61.4 | — | — | 452.0 | ||||||||||||||||||||
Miscellaneous receivables | — | 92.6 | 130.1 | 12.2 | — | — | 234.9 | ||||||||||||||||||||
Prepaid expenses and other | — | 14.3 | 69.0 | 35.6 | — | — | 118.9 | ||||||||||||||||||||
Total current assets | — | 329.6 | 2,497.7 | 410.8 | — | — | 3,238.1 | ||||||||||||||||||||
Property and equipment, net | — | 105.6 | 49.3 | 8.8 | — | — | 163.7 | ||||||||||||||||||||
Goodwill | — | 751.8 | 1,439.0 | 264.2 | — | — | 2,455.0 | ||||||||||||||||||||
Other intangible assets, net | — | 291.5 | 565.1 | 199.0 | — | — | 1,055.6 | ||||||||||||||||||||
Other assets | 3.2 | 19.4 | 248.2 | 1.5 | — | (236.3 | ) | 36.0 | |||||||||||||||||||
Investment in and advances to subsidiaries | 1,042.3 | 3,026.5 | — | — | — | (4,068.8 | ) | — | |||||||||||||||||||
Total Assets | $ | 1,045.5 | $ | 4,524.4 | $ | 4,799.3 | $ | 884.3 | $ | — | $ | (4,305.1 | ) | $ | 6,948.4 | ||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||
Accounts payable-trade | $ | — | $ | 25.9 | $ | 895.3 | $ | 151.7 | $ | — | $ | — | $ | 1,072.9 | |||||||||||||
Accounts payable-inventory financing | — | 1.2 | 559.5 | 19.7 | — | — | 580.4 | ||||||||||||||||||||
Current maturities of long-term debt | — | 14.9 | 3.6 | — | — | — | 18.5 | ||||||||||||||||||||
Deferred revenue | — | — | 100.8 | 71.8 | — | — | 172.6 | ||||||||||||||||||||
Accrued expenses | — | 173.9 | 214.8 | 47.7 | — | (0.1 | ) | 436.3 | |||||||||||||||||||
Total current liabilities | — | 215.9 | 1,774.0 | 290.9 | — | (0.1 | ) | 2,280.7 | |||||||||||||||||||
Long-term liabilities: | |||||||||||||||||||||||||||
Debt | — | 3,136.3 | 12.1 | 67.5 | — | — | 3,215.9 | ||||||||||||||||||||
Deferred income taxes | — | 99.1 | 205.4 | 67.9 | — | (3.2 | ) | 369.2 | |||||||||||||||||||
Other liabilities | — | 30.8 | 3.6 | 235.7 | — | (233.0 | ) | 37.1 | |||||||||||||||||||
Total long-term liabilities | — | 3,266.2 | 221.1 | 371.1 | — | (236.2 | ) | 3,622.2 | |||||||||||||||||||
Total stockholders’ equity | 1,045.5 | 1,042.3 | 2,804.2 | 222.3 | — | (4,068.8 | ) | 1,045.5 | |||||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,045.5 | $ | 4,524.4 | $ | 4,799.3 | $ | 884.3 | $ | — | $ | (4,305.1 | ) | $ | 6,948.4 |
Condensed Consolidating Balance Sheet | |||||||||||||||||||||||||||
December 31, 2015 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 45.1 | $ | — | $ | 31.9 | $ | — | $ | (39.4 | ) | $ | 37.6 | ||||||||||||
Accounts receivable, net | — | — | 1,788.6 | 228.8 | — | — | 2,017.4 | ||||||||||||||||||||
Merchandise inventory | — | — | 340.3 | 52.8 | — | — | 393.1 | ||||||||||||||||||||
Miscellaneous receivables | — | 83.7 | 90.1 | 24.6 | — | — | 198.4 | ||||||||||||||||||||
Prepaid expenses and other | — | 13.0 | 50.4 | 84.0 | — | (3.1 | ) | 144.3 | |||||||||||||||||||
Total current assets | — | 141.8 | 2,269.4 | 422.1 | — | (42.5 | ) | 2,790.8 | |||||||||||||||||||
Property and equipment, net | — | 110.0 | 54.1 | 11.3 | — | — | 175.4 | ||||||||||||||||||||
Goodwill | — | 751.8 | 1,439.0 | 309.6 | — | — | 2,500.4 | ||||||||||||||||||||
Other intangible assets, net | — | 306.0 | 704.9 | 265.5 | — | — | 1,276.4 | ||||||||||||||||||||
Other assets | 3.8 | 17.3 | 263.0 | 3.0 | — | (274.8 | ) | 12.3 | |||||||||||||||||||
Investment in and advances to subsidiaries | 1,092.1 | 3,302.0 | — | — | — | (4,394.1 | ) | — | |||||||||||||||||||
Total Assets | $ | 1,095.9 | $ | 4,628.9 | $ | 4,730.4 | $ | 1,011.5 | $ | — | $ | (4,711.4 | ) | $ | 6,755.3 | ||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||
Accounts payable-trade | $ | — | $ | 31.0 | $ | 727.4 | $ | 147.5 | $ | — | $ | (39.4 | ) | $ | 866.5 | ||||||||||||
Accounts payable-inventory financing | — | — | 428.4 | 11.4 | — | (0.2 | ) | 439.6 | |||||||||||||||||||
Current maturities of long-term debt | — | 15.4 | — | 11.8 | — | — | 27.2 | ||||||||||||||||||||
Deferred revenue | — | — | 77.4 | 74.5 | — | — | 151.9 | ||||||||||||||||||||
Accrued expenses | — | 156.0 | 190.9 | 58.6 | — | (3.4 | ) | 402.1 | |||||||||||||||||||
Total current liabilities | — | 202.4 | 1,424.1 | 303.8 | — | (43.0 | ) | 1,887.3 | |||||||||||||||||||
Long-term liabilities: | |||||||||||||||||||||||||||
Debt | — | 3,156.5 | — | 76.0 | — | — | 3,232.5 | ||||||||||||||||||||
Deferred income taxes | — | 117.3 | 272.8 | 83.4 | — | (3.9 | ) | 469.6 | |||||||||||||||||||
Other liabilities | — | 60.7 | 2.9 | 276.8 | — | (270.4 | ) | 70.0 | |||||||||||||||||||
Total long-term liabilities | — | 3,334.5 | 275.7 | 436.2 | — | (274.3 | ) | 3,772.1 | |||||||||||||||||||
Total stockholders’ equity | 1,095.9 | 1,092.0 | 3,030.6 | 271.5 | — | (4,394.1 | ) | 1,095.9 | |||||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,095.9 | $ | 4,628.9 | $ | 4,730.4 | $ | 1,011.5 | $ | — | $ | (4,711.4 | ) | $ | 6,755.3 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Year Ended December 31, 2016 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 12,619.3 | $ | 1,362.6 | $ | — | $ | — | $ | 13,981.9 | |||||||||||||
Cost of sales | — | — | 10,514.4 | 1,140.3 | — | — | 11,654.7 | ||||||||||||||||||||
Gross profit | — | — | 2,104.9 | 222.3 | — | — | 2,327.2 | ||||||||||||||||||||
Selling and administrative expenses | — | 114.8 | 1,057.4 | 172.9 | — | — | 1,345.1 | ||||||||||||||||||||
Advertising expense | — | — | 157.2 | 5.7 | — | — | 162.9 | ||||||||||||||||||||
Income (loss) from operations | — | (114.8 | ) | 890.3 | 43.7 | — | — | 819.2 | |||||||||||||||||||
Interest (expense) income, net | — | (145.8 | ) | 6.7 | (7.4 | ) | — | — | (146.5 | ) | |||||||||||||||||
Net loss on extinguishments of long-term debt | — | (2.1 | ) | — | — | — | — | (2.1 | ) | ||||||||||||||||||
Other income (expense), net | — | 0.2 | 1.0 | 0.6 | — | — | 1.8 | ||||||||||||||||||||
Income (loss) before income taxes | — | (262.5 | ) | 898.0 | 36.9 | — | — | 672.4 | |||||||||||||||||||
Income tax benefit (expense) | — | 79.9 | (319.9 | ) | (8.0 | ) | — | — | (248.0 | ) | |||||||||||||||||
Income (loss) before equity in earnings of subsidiaries | — | (182.6 | ) | 578.1 | 28.9 | — | — | 424.4 | |||||||||||||||||||
Equity in earnings of subsidiaries | 424.4 | 607.0 | — | — | — | (1,031.4 | ) | — | |||||||||||||||||||
Net income | $ | 424.4 | $ | 424.4 | $ | 578.1 | $ | 28.9 | $ | — | $ | (1,031.4 | ) | $ | 424.4 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Year Ended December 31, 2015 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 12,151.2 | $ | 837.5 | $ | — | $ | — | $ | 12,988.7 | |||||||||||||
Cost of sales | — | — | 10,158.6 | 714.3 | — | — | 10,872.9 | ||||||||||||||||||||
Gross profit | — | — | 1,992.6 | 123.2 | — | — | 2,115.8 | ||||||||||||||||||||
Selling and administrative expenses | — | 114.5 | 1,020.9 | 90.6 | — | — | 1,226.0 | ||||||||||||||||||||
Advertising expense | — | — | 143.2 | 4.6 | — | — | 147.8 | ||||||||||||||||||||
(Loss) income from operations | — | (114.5 | ) | 828.5 | 28.0 | — | — | 742.0 | |||||||||||||||||||
Interest (expense) income, net | — | (158.3 | ) | 2.3 | (3.5 | ) | — | — | (159.5 | ) | |||||||||||||||||
Net loss on extinguishments of long-term debt | — | (24.3 | ) | — | — | — | — | (24.3 | ) | ||||||||||||||||||
Management fee | — | 4.2 | — | (4.2 | ) | — | — | — | |||||||||||||||||||
Gain on remeasurement of equity investment | — | — | — | 98.1 | — | — | 98.1 | ||||||||||||||||||||
Other (expense) income, net | — | (11.1 | ) | 1.6 | 0.2 | — | — | (9.3 | ) | ||||||||||||||||||
(Loss) income before income taxes | — | (304.0 | ) | 832.4 | 118.6 | — | — | 647.0 | |||||||||||||||||||
Income tax benefit (expense) | — | 103.3 | (307.2 | ) | (40.0 | ) | — | — | (243.9 | ) | |||||||||||||||||
(Loss) income before equity in earnings of subsidiaries | — | (200.7 | ) | 525.2 | 78.6 | — | — | 403.1 | |||||||||||||||||||
Equity in earnings of subsidiaries | 403.1 | 603.8 | — | — | — | (1,006.9 | ) | — | |||||||||||||||||||
Net income | $ | 403.1 | $ | 403.1 | $ | 525.2 | $ | 78.6 | $ | — | $ | (1,006.9 | ) | $ | 403.1 |
Consolidating Statement of Operations | |||||||||||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net sales | $ | — | $ | — | $ | 11,542.3 | $ | 532.2 | $ | — | $ | — | $ | 12,074.5 | |||||||||||||
Cost of sales | — | — | 9,684.9 | 468.3 | — | — | 10,153.2 | ||||||||||||||||||||
Gross profit | — | — | 1,857.4 | 63.9 | — | — | 1,921.3 | ||||||||||||||||||||
Selling and administrative expenses | — | 112.8 | 962.3 | 35.2 | — | — | 1,110.3 | ||||||||||||||||||||
Advertising expense | — | — | 134.0 | 4.0 | — | — | 138.0 | ||||||||||||||||||||
(Loss) income from operations | — | (112.8 | ) | 761.1 | 24.7 | — | — | 673.0 | |||||||||||||||||||
Interest (expense) income, net | — | (197.7 | ) | 0.1 | 0.3 | — | — | (197.3 | ) | ||||||||||||||||||
Net loss on extinguishments of long-term debt | — | (90.7 | ) | — | — | — | — | (90.7 | ) | ||||||||||||||||||
Management fee | — | 3.9 | — | (3.9 | ) | — | — | — | |||||||||||||||||||
Other income, net | — | 1.2 | 1.5 | — | — | — | 2.7 | ||||||||||||||||||||
(Loss) income before income taxes | — | (396.1 | ) | 762.7 | 21.1 | — | — | 387.7 | |||||||||||||||||||
Income tax benefit (expense) | — | 141.0 | (278.1 | ) | (5.7 | ) | — | — | (142.8 | ) | |||||||||||||||||
(Loss) income before equity in earnings of subsidiaries | — | (255.1 | ) | 484.6 | 15.4 | — | — | 244.9 | |||||||||||||||||||
Equity in earnings of subsidiaries | 244.9 | 500.0 | — | — | — | (744.9 | ) | — | |||||||||||||||||||
Net income | $ | 244.9 | $ | 244.9 | $ | 484.6 | $ | 15.4 | $ | — | $ | (744.9 | ) | $ | 244.9 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Year Ended December 31, 2016 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income (loss) | $ | 345.9 | $ | 345.9 | $ | 578.1 | $ | (49.6 | ) | $ | — | $ | (874.4 | ) | $ | 345.9 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Year Ended December 31, 2015 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income | $ | 358.6 | $ | 358.6 | $ | 525.2 | $ | 34.1 | $ | — | $ | (917.9 | ) | $ | 358.6 |
Condensed Consolidating Statement of Comprehensive Income | |||||||||||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Comprehensive income | $ | 234.6 | $ | 234.6 | $ | 484.6 | $ | 5.1 | $ | — | $ | (724.3 | ) | $ | 234.6 |
Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||||||||||
Year Ended December 31, 2016 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | — | $ | (158.5 | ) | $ | 695.5 | $ | 56.1 | $ | — | $ | 10.9 | $ | 604.0 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||
Capital expenditures | — | (50.9 | ) | (7.6 | ) | (5.0 | ) | — | — | (63.5 | ) | ||||||||||||||||
Premium payments on interest rate cap agreements | — | (2.4 | ) | — | — | — | — | (2.4 | ) | ||||||||||||||||||
Net cash used in investing activities | — | (53.3 | ) | (7.6 | ) | (5.0 | ) | — | — | (65.9 | ) | ||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||
Proceeds from borrowings under revolving credit facility | — | 329.6 | — | 9.2 | — | — | 338.8 | ||||||||||||||||||||
Repayments of borrowings under revolving credit facility | — | (329.6 | ) | — | (9.2 | ) | — | — | (338.8 | ) | |||||||||||||||||
Repayments of long-term debt | — | (15.2 | ) | — | (5.4 | ) | — | — | (20.6 | ) | |||||||||||||||||
Proceeds from the issuance of long-term debt | — | 1,483.0 | — | — | — | — | 1,483.0 | ||||||||||||||||||||
Payments to extinguish long-term debt | — | (1,490.4 | ) | — | — | — | — | (1,490.4 | ) | ||||||||||||||||||
Net change in other long-term obligation | — | — | 15.7 | — | — | — | 15.7 | ||||||||||||||||||||
Payment of debt financing costs | — | (4.5 | ) | — | (1.4 | ) | — | — | (5.9 | ) | |||||||||||||||||
Net change in accounts payable-inventory financing | — | 1.5 | 131.0 | 11.1 | — | — | 143.6 | ||||||||||||||||||||
Proceeds from stock option exercises | — | 7.4 | — | — | — | — | 7.4 | ||||||||||||||||||||
Proceeds from Coworker stock purchase plan | — | 9.3 | — | — | — | — | 9.3 | ||||||||||||||||||||
Repurchases of common stock | (367.4 | ) | — | — | — | — | — | (367.4 | ) | ||||||||||||||||||
Dividends | (78.7 | ) | — | — | — | — | — | (78.7 | ) | ||||||||||||||||||
Principal payments under capital lease obligations | — | — | 1.0 | (1.6 | ) | — | — | (0.6 | ) | ||||||||||||||||||
Repayment of intercompany loan | — | — | 40.4 | (40.4 | ) | — | — | — | |||||||||||||||||||
Distributions and advances from (to) affiliates | 446.1 | 398.3 | (872.9 | ) | — | — | 28.5 | — | |||||||||||||||||||
Net cash provided by (used in) financing activities | — | 389.4 | (684.8 | ) | (37.7 | ) | — | 28.5 | (304.6 | ) | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | (7.4 | ) | — | — | (7.4 | ) | ||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | 177.6 | 3.1 | 6.0 | — | 39.4 | 226.1 | ||||||||||||||||||||
Cash and cash equivalents – beginning of period | — | 45.1 | — | 31.9 | — | (39.4 | ) | 37.6 | |||||||||||||||||||
Cash and cash equivalents – end of period | $ | — | $ | 222.7 | $ | 3.1 | $ | 37.9 | $ | — | $ | — | $ | 263.7 |
Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||||||||||
Year Ended December 31, 2015 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | 0.5 | $ | (18.1 | ) | $ | 350.0 | $ | 27.9 | $ | — | $ | (82.8 | ) | $ | 277.5 | |||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||
Capital expenditures | — | (75.4 | ) | (11.6 | ) | (3.1 | ) | — | — | (90.1 | ) | ||||||||||||||||
Acquisition of business, net of cash acquired | — | — | — | (263.8 | ) | — | — | (263.8 | ) | ||||||||||||||||||
Premium payments on interest rate cap agreements | — | (0.5 | ) | — | — | — | — | (0.5 | ) | ||||||||||||||||||
Net cash used in investing activities | — | (75.9 | ) | (11.6 | ) | (266.9 | ) | — | — | (354.4 | ) | ||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||
Proceeds from borrowings under revolving credit facility | — | 314.5 | — | — | — | — | 314.5 | ||||||||||||||||||||
Repayments of borrowings under revolving credit facility | — | (314.5 | ) | — | — | — | — | (314.5 | ) | ||||||||||||||||||
Repayments of long-term debt | — | (15.4 | ) | — | (17.4 | ) | — | — | (32.8 | ) | |||||||||||||||||
Proceeds from issuance of long-term debt | — | 525.0 | — | — | — | — | 525.0 | ||||||||||||||||||||
Payments to extinguish long-term debt | — | (525.3 | ) | — | — | — | — | (525.3 | ) | ||||||||||||||||||
Payment of debt financing costs | — | (6.8 | ) | — | — | — | — | (6.8 | ) | ||||||||||||||||||
Net change in accounts payable-inventory financing | — | — | 96.1 | (0.2 | ) | — | — | 95.9 | |||||||||||||||||||
Proceeds from stock option exercises | — | 2.4 | — | — | — | — | 2.4 | ||||||||||||||||||||
Proceeds from Coworker stock purchase plan | — | 8.7 | — | — | — | — | 8.7 | ||||||||||||||||||||
Repurchases of common stock | (241.3 | ) | — | — | — | — | — | (241.3 | ) | ||||||||||||||||||
Dividends paid | (52.9 | ) | — | — | — | — | — | (52.9 | ) | ||||||||||||||||||
Excess tax benefits from equity-based compensation | — | 0.6 | — | — | — | — | 0.6 | ||||||||||||||||||||
Advances to/from affiliates | 293.7 | (196.5 | ) | (434.5 | ) | 267.4 | — | 69.9 | — | ||||||||||||||||||
Net cash provided by (used in) financing activities | (0.5 | ) | (207.3 | ) | (338.4 | ) | 249.8 | — | 69.9 | (226.5 | ) | ||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | (3.5 | ) | — | — | (3.5 | ) | ||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | (301.3 | ) | — | 7.3 | — | (12.9 | ) | (306.9 | ) | |||||||||||||||||
Cash and cash equivalents – beginning of period | — | 346.4 | — | 24.6 | — | (26.5 | ) | 344.5 | |||||||||||||||||||
Cash and cash equivalents – end of period | $ | — | $ | 45.1 | $ | — | $ | 31.9 | $ | — | $ | (39.4 | ) | $ | 37.6 |
Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||||||||||
Year Ended December 31, 2014 | |||||||||||||||||||||||||||
(in millions) | Parent Guarantor | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiary | Co-Issuer | Consolidating Adjustments | Consolidated | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | — | $ | (120.4 | ) | $ | 547.7 | $ | 11.8 | $ | — | $ | (4.1 | ) | $ | 435.0 | |||||||||||
Cash flows from investing activities: | |||||||||||||||||||||||||||
Capital expenditures | — | (47.9 | ) | (7.1 | ) | — | — | — | (55.0 | ) | |||||||||||||||||
Payment for equity investments | — | (86.8 | ) | — | — | — | — | (86.8 | ) | ||||||||||||||||||
Payment of accrued charitable contribution related to the MPK Coworker Incentive Plan II | — | (20.9 | ) | — | — | — | — | (20.9 | ) | ||||||||||||||||||
Premium payments on interest rate cap agreements | — | (2.1 | ) | — | — | — | — | (2.1 | ) | ||||||||||||||||||
Net cash used in investing activities | — | (157.7 | ) | (7.1 | ) | — | — | — | (164.8 | ) | |||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||||||||
Repayments of long-term debt | — | (15.4 | ) | — | — | — | — | (15.4 | ) | ||||||||||||||||||
Proceeds from issuance of long-term debt | — | 1,175.0 | — | — | — | — | 1,175.0 | ||||||||||||||||||||
Payments to extinguish long-term debt | — | (1,299.0 | ) | — | — | — | — | (1,299.0 | ) | ||||||||||||||||||
Payment of debt financing costs | — | (21.9 | ) | — | — | — | — | (21.9 | ) | ||||||||||||||||||
Net change in accounts payable-inventory financing | — | — | 75.5 | — | — | — | 75.5 | ||||||||||||||||||||
Proceeds from stock option exercises | — | 1.3 | — | — | — | — | 1.3 | ||||||||||||||||||||
Proceeds from Coworker stock purchase plan | — | 5.8 | — | — | — | — | 5.8 | ||||||||||||||||||||
Dividends paid | (33.6 | ) | — | — | — | — | — | (33.6 | ) | ||||||||||||||||||
Excess tax benefits from equity-based compensation | — | 0.3 | — | — | — | — | 0.3 | ||||||||||||||||||||
Advances to/from affiliates | 33.6 | 581.9 | (616.1 | ) | 0.6 | — | — | — | |||||||||||||||||||
Net cash provided by (used in) financing activities | — | 428.0 | (540.6 | ) | 0.6 | — | — | (112.0 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | (1.8 | ) | — | — | (1.8 | ) | ||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | 149.9 | — | 10.6 | — | (4.1 | ) | 156.4 | |||||||||||||||||||
Cash and cash equivalents – beginning of period | — | 196.5 | — | 14.0 | — | (22.4 | ) | 188.1 | |||||||||||||||||||
Cash and cash equivalents – end of period | $ | — | $ | 346.4 | $ | — | $ | 24.6 | $ | — | $ | (26.5 | ) | $ | 344.5 |
Year Ended December 31, 2016 | ||||||||||||||||
(in millions, except per-share amounts) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||
Net Sales: | ||||||||||||||||
Corporate(1) | $ | 1,414.9 | $ | 1,490.8 | $ | 1,466.4 | $ | 1,517.7 | ||||||||
Small Business (1) | 277.4 | 288.4 | 282.5 | 291.8 | ||||||||||||
Public: | ||||||||||||||||
Government | 339.9 | 456.6 | 537.5 | 529.6 | ||||||||||||
Education | 341.0 | 640.0 | 671.4 | 365.9 | ||||||||||||
Healthcare | 388.5 | 450.4 | 431.7 | 436.8 | ||||||||||||
Total Public | 1,069.4 | 1,547.0 | 1,640.6 | 1,332.3 | ||||||||||||
Other | 355.0 | 338.4 | 318.7 | 350.5 | ||||||||||||
Net sales | $ | 3,116.7 | $ | 3,664.6 | $ | 3,708.2 | $ | 3,492.4 | ||||||||
Gross profit | $ | 524.5 | $ | 610.5 | $ | 614.3 | $ | 577.9 | ||||||||
Income from operations | 161.0 | 223.5 | 237.5 | 197.2 | ||||||||||||
Net income | 77.8 | 117.5 | 125.9 | 103.2 | ||||||||||||
Basic | 0.47 | 0.71 | 0.78 | 0.64 | ||||||||||||
Diluted | 0.46 | 0.70 | 0.76 | 0.63 | ||||||||||||
Cash dividends declared per common share | $ | 0.1075 | $ | 0.1075 | $ | 0.1075 | $ | 0.1600 | ||||||||
Year Ended December 31, 2015(3) | ||||||||||||||||
(in millions, except per-share amounts) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||
Net Sales: | ||||||||||||||||
Corporate(1) | $ | 1,336.9 | $ | 1,517.9 | $ | 1,499.6 | $ | 1,524.3 | ||||||||
Small Business(1) | 273.5 | 280.7 | 265.1 | 270.3 | ||||||||||||
Public: | ||||||||||||||||
Government | 294.2 | 390.8 | 493.9 | 522.0 | ||||||||||||
Education | 345.4 | 548.9 | 583.3 | 341.2 | ||||||||||||
Healthcare | 377.6 | 448.8 | 406.7 | 430.8 | ||||||||||||
Total Public | 1,017.2 | 1,388.5 | 1,483.9 | 1,294.0 | ||||||||||||
Other | 127.6 | 126.9 | 252.5 | 329.8 | ||||||||||||
Net sales | $ | 2,755.2 | $ | 3,314.0 | $ | 3,501.1 | $ | 3,418.4 | ||||||||
Gross profit | $ | 456.5 | $ | 534.5 | $ | 567.2 | $ | 557.6 | ||||||||
Income from operations | 151.6 | 205.9 | 204.6 | 179.9 | ||||||||||||
Net income | 54.7 | 108.2 | 150.9 | 89.3 | ||||||||||||
Net income per common share (2): | ||||||||||||||||
Basic | 0.32 | 0.63 | 0.89 | 0.53 | ||||||||||||
Diluted | 0.32 | 0.63 | 0.88 | 0.52 | ||||||||||||
Cash dividends declared per common share | $ | 0.0675 | $ | 0.0675 | $ | 0.0675 | $ | 0.1075 |
(1) | Amounts have been recast to present Small Business as its own operating and reportable segment. |
(2) | Basic and diluted net income per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted net income per share. |
(3) | Effective January 1, 2016, CDW Advanced Services is no longer an operating segment and its results have been allocated to our Corporate, Small Business and Public segments. The prior periods have been reclassified to conform to the current period presentation. |
Document and Entity Information |
12 Months Ended |
---|---|
Dec. 31, 2016 | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | CDW Corp |
Entity Central Index Key | 0001402057 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 8-K |
Document Period End Date | Dec. 31, 2016 |
Document Fiscal Year Focus | 2016 |
Document Fiscal Period Focus | FY |
Amendment Flag | false |
Consolidated Balance Sheets Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Millions, $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 5.9 | $ 6.0 |
Preferred shares, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred shares, authorized (in shares) | 100.0 | 100.0 |
Preferred shares, issued (in shares) | 0.0 | 0.0 |
Preferred shares, outstanding (in shares) | 0.0 | 0.0 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common shares, authorized (in shares) | 1,000.0 | 1,000.0 |
Common shares, issued (in shares) | 160.3 | 168.2 |
Common shares, outstanding (in shares) | 160.3 | 168.2 |
Consolidated Statements Of Operations - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Statement [Abstract] | |||||||||||
Net sales | $ 3,492.4 | $ 3,708.2 | $ 3,664.6 | $ 3,116.7 | $ 3,418.4 | $ 3,501.1 | $ 3,314.0 | $ 2,755.2 | $ 13,981.9 | $ 12,988.7 | $ 12,074.5 |
Cost of sales | 11,654.7 | 10,872.9 | 10,153.2 | ||||||||
Gross profit | 577.9 | 614.3 | 610.5 | 524.5 | 557.6 | 567.2 | 534.5 | 456.5 | 2,327.2 | 2,115.8 | 1,921.3 |
Selling and administrative expenses | 1,345.1 | 1,226.0 | 1,110.3 | ||||||||
Advertising expense | 162.9 | 147.8 | 138.0 | ||||||||
Income from operations | 197.2 | 237.5 | 223.5 | 161.0 | 179.9 | 204.6 | 205.9 | 151.6 | 819.2 | 742.0 | 673.0 |
Interest expense, net | (146.5) | (159.5) | (197.3) | ||||||||
Net loss on extinguishments of long-term debt | (2.1) | (24.3) | (90.7) | ||||||||
Gain on remeasurement of equity investment | 0.0 | 98.1 | 0.0 | ||||||||
Other income (expense), net | 1.8 | (9.3) | 2.7 | ||||||||
Income before income taxes | 672.4 | 647.0 | 387.7 | ||||||||
Income tax expense | (248.0) | (243.9) | (142.8) | ||||||||
Net income | $ 103.2 | $ 125.9 | $ 117.5 | $ 77.8 | $ 89.3 | $ 150.9 | $ 108.2 | $ 54.7 | $ 424.4 | $ 403.1 | $ 244.9 |
Net income per common share: | |||||||||||
Earnings per share, basic (in dollars per share) | $ 0.64 | $ 0.78 | $ 0.71 | $ 0.47 | $ 0.53 | $ 0.89 | $ 0.63 | $ 0.32 | $ 2.59 | $ 2.37 | $ 1.44 |
Earnings per share, diluted (in dollars per share) | 0.63 | 0.76 | 0.70 | 0.46 | 0.52 | 0.88 | 0.63 | 0.32 | $ 2.56 | $ 2.35 | $ 1.42 |
Weighted Average Number of Shares Outstanding, Basic [Abstract] | |||||||||||
Basic weighted-average shares outstanding (in shares) | 163.6 | 170.3 | 170.6 | ||||||||
Diluted weighted-average shares outstanding (in shares) | 166.0 | 171.8 | 172.8 | ||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.1600 | $ 0.1075 | $ 0.1075 | $ 0.1075 | $ 0.1075 | $ 0.0675 | $ 0.0675 | $ 0.0675 | $ 0.4825 | $ 0.3100 | $ 0.1950 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 424.4 | $ 403.1 | $ 244.9 |
Foreign currency translation | (78.5) | (44.5) | (10.3) |
Other comprehensive loss, net of tax | (78.5) | (44.5) | (10.3) |
Comprehensive income | $ 345.9 | $ 358.6 | $ 234.6 |
Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Statement of Comprehensive Income [Abstract] | |||
Foreign currency translation (expense) benefit | $ (0.2) | $ (0.3) | $ 0.5 |
Description of Business and Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business and Summary of Significant Accounting Policies | Description of Business and Summary of Significant Accounting Policies Description of Business CDW Corporation (“Parent”) is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions to small, medium and large business, government, education and healthcare customers in North America and the United Kingdom. The Company’s offerings range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. Throughout this report, the terms “the Company” and “CDW” refer to Parent and its 100% owned subsidiaries. Parent has two 100% owned subsidiaries, CDW LLC and CDW Finance Corporation. CDW LLC is an Illinois limited liability company that, together with its 100% owned subsidiaries, holds all material assets and conducts all business activities and operations of the Company. CDW Finance Corporation is a Delaware corporation formed for the sole purpose of acting as co-issuer of certain debt obligations as described in Note 17 (Supplemental Guarantor Information) and does not hold any material assets or engage in any business activities or operations. On August 1, 2015, the Company completed the acquisition of Kelway TopCo Limited (“Kelway”), a UK-based IT solutions provider with global offerings by purchasing the remaining 65% of its outstanding common stock, which increased the Company’s ownership interest from 35% to 100% and provided the Company control. In 2016 Kelway was rebranded CDW UK. For further information regarding the acquisition, see Note 3 (Acquisition) to the accompanying Consolidated Financial Statements. Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the US Securities and Exchange Commission (“SEC”). Principles of Consolidation The Consolidated Financial Statements include the accounts of Parent and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation. Use of Estimates The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Business Combinations The Company accounts for all business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company may utilize third-party valuation specialists to assist the Company in the allocation. Initial purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred. Cash and Cash Equivalents Cash and cash equivalents include all deposits in banks and short-term (original maturities of three months or less at the time of purchase), highly liquid investments that are readily convertible to known amounts of cash and are so near maturity that there is insignificant risk of changes in value due to interest rate changes. Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and typically do not bear interest. The Company provides allowances for doubtful accounts related to accounts receivable for estimated losses resulting from the inability of its customers to make required payments. The Company takes into consideration the overall quality of the receivable portfolio along with specifically-identified customer risks in establishing the allowance. Merchandise Inventory Inventory is valued at the lower of cost or market value. Cost is determined using a weighted-average cost method. Price protection is recorded when earned as a reduction to the cost of inventory. The Company decreases the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about future demand and market conditions. Miscellaneous Receivables Miscellaneous receivables generally consist of amounts due from vendors. The Company receives incentives from vendors related to cooperative advertising, volume rebates, bid programs, price protection and other programs. These incentives generally relate to written vendor agreements with specified performance requirements and are recorded as adjustments to Cost of sales or Merchandise inventory, depending on the nature of the incentive. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. The Company calculates depreciation expense using the straight-line method over the estimated useful lives of the assets. Property and equipment are reviewed annually to determine whether there is any impairment. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. Leasehold improvements are amortized over the shorter of their estimated useful lives or the initial lease term. Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
The Company has asset retirement obligations associated with commitments to return property subject to the terms of operating leases to its original condition upon lease termination. The Company’s asset retirement liability was less than $1 million and $2 million at December 31, 2016 and 2015, respectively. Equity Investments If the Company is not required to consolidate its investment in another entity because it does not have control, the Company uses the equity method if it (i) can exercise significant influence over the other entity and (ii) holds common stock of the other entity. Under the equity method, investments are carried at cost, plus or minus the Company’s share of equity in the increases and decreases in the investee’s net assets after the date of acquisition and adjustments for basis differences. The Company’s share of the income or loss of equity method investees is included in Other income (expense), net in the Consolidated Statements of Operations. Goodwill The Company performs an evaluation of goodwill, utilizing either a quantitative or qualitative impairment test, on an annual basis, or more frequently if circumstances indicate a potential impairment. The annual test for impairment is conducted as of December 1. The Company’s reporting units used to assess potential goodwill impairment are the same as its operating segments. Under a quantitative assessment, testing for impairment of goodwill is a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill to determine the amount of impairment loss. Fair value of a reporting unit is determined by using a weighted combination of an income approach (75%) and a market approach (25%), as this combination is considered the most indicative of the Company’s fair value in an orderly transaction between market participants. Under the income approach, the Company determines fair value based on estimated future cash flows of a reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. The estimated future cash flows of each reporting unit is based on internally generated forecasts for the remainder of the respective reporting period and the next ten years. The Company uses a range of 2.0%-3.5% long-term assumed consolidated annual Net sales growth rate for periods after the ten-year forecast. Under the market approach, the Company utilizes valuation multiples derived from publicly available information for guideline companies to provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. The valuation multiples are applied to the reporting units. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including Net sales growth rates, gross margins, operating margins, discount rates and future market conditions, among others. Any changes in the judgments, estimates or assumptions used could produce significantly different results. Under a qualitative assessment, the most recent quantitative assessment is the starting point to determine if it is more- likely-than-not that the reporting unit’s goodwill is impaired. As part of this qualitative assessment, the Company assesses relevant events and circumstances including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, changes in share price and entity-specific events. Intangible Assets Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives. The cost of computer software developed or obtained for internal use is capitalized and amortized on a straight-line basis over the estimated useful life of the software. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. In addition, each quarter, the Company evaluates whether events and circumstances warrant a revision to the remaining estimated useful life of each of these intangible assets. If the Company were to determine that a change to the remaining estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life. The following table shows estimated useful lives of definite-lived intangible assets:
Deferred Financing Costs Deferred financing costs, such as underwriting, financial advisory, professional fees and other similar fees are capitalized and recognized in Interest expense, net over the estimated life of the related debt instrument using the effective interest method or straight-line method, as applicable. The Company classifies deferred financing costs as a direct deduction from the carrying value of the long-term debt liability on the Consolidated Balance Sheets, except for deferred financing costs associated with line-of-credit arrangements which are presented as an asset, within “Other assets” on the Consolidated Balance Sheets. Derivatives The Company has entered into interest rate cap agreements for the purpose of economically hedging its exposure to fluctuations in interest rates. These derivatives are recorded at fair value on the Consolidated Balance Sheets. The Company’s interest rate cap agreements are not designated as cash flow hedges of interest rate risk. Changes in fair value of the derivatives are recorded directly to Interest expense, net in the Consolidated Statements of Operations. Fair Value Measurements Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established for valuation inputs to prioritize the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 – observable inputs such as quoted prices for identical instruments traded in active markets. Level 2 – inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques. Accumulated Other Comprehensive Loss Foreign currency translation adjustments are included in Stockholders’ equity under Accumulated other comprehensive loss. The components of accumulated other comprehensive loss are as follows:
Revenue Recognition The Company is a primary distribution channel for a large group of vendors and suppliers, including original equipment manufacturers (“OEMs”), software publishers and wholesale distributors. The Company records revenue from sales transactions when title and risk of loss are passed to the customer, there is persuasive evidence of an arrangement for sale, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. The Company’s shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed to the customer. Revenues from the sales of hardware products and software licenses are generally recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales. These items can be delivered to customers in a variety of ways, including (i) as physical product shipped from the Company’s warehouse, (ii) via drop-shipment by the vendor or supplier, or (iii) via electronic delivery for software licenses. At the time of sale, the Company records an estimate for sales returns and allowances based on historical experience. The Company’s vendor partners warrant most of the products the Company sells. The Company leverages drop-shipment arrangements with many of its vendors and suppliers to deliver products to its customers without having to physically hold the inventory at its warehouses, thereby increasing efficiency and reducing costs. The Company recognizes revenue for drop-shipment arrangements on a gross basis upon delivery to the customer with contract terms that typically specify F.O.B. destination. Revenue from professional services is either recognized as provided for services billed at an hourly rate, recognized using a percentage of completion model for fixed fee project work or recognized using a proportional performance model for services provided at a fixed fee. Revenues for cloud computing solutions including Software as a Service (“SaaS”) and Infrastructure as a Service (“IaaS”) arrangements with one time invoicing to the customer are recognized at the time of invoice. Revenues for data center services such as managed and remote managed services, server co-location, internet connectivity, data backup and storage, and SaaS and IaaS arrangements where the customer is invoiced over time are recognized over the period service is provided. The Company also sells certain products for which it acts as an agent. Products in this category include the sale of third-party services, warranties, software assurance (“SA”) and third-party hosted SaaS and IaaS arrangements. SA is a product that allows customers to upgrade, at no additional cost, to the latest technology if new applications are introduced during the period that the SA is in effect. These sales do not meet the criteria for gross sales recognition, and thus are recognized on a net basis at the time of sale. Under Net sales recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in Net sales being equal to the gross profit on the transaction. The Company’s larger customers are offered the opportunity by certain of its vendors to purchase software licenses and SA under enterprise agreements (“EAs”). Under EAs, customers are considered to be compliant with applicable license requirements for the ensuing year, regardless of changes to their employee base. Customers are charged an annual true-up fee for changes in the number of users over the year. With most EAs, the Company’s vendors will transfer the license and bill the customer directly, paying resellers such as the Company an agency fee or commission on these sales. The Company records these fees as a component of Net sales as earned and there is no corresponding cost of sales amount. In certain instances, the Company bills the customer directly under an EA and accounts for the individual items sold based on the nature of the item. The Company’s vendors typically dictate how the EA will be sold to the customer. The Company also sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a separate unit of accounting, total arrangement consideration is allocated based upon the relative selling prices of each element. The allocated arrangement consideration is recognized as revenue in accordance with the principles described above. Relative selling prices are determined by using vendor specific objective evidence (“VSOE”) if it exists. Otherwise, selling prices are determined using third-party evidence (“TPE”). If neither VSOE or TPE is available, the Company uses its best estimate of selling prices. The Company records freight billed to its customers as Net sales and the related freight costs as a Cost of sales. Deferred revenue includes (1) payments received from customers in advance of providing the product or performing services and (2) amounts deferred if other conditions of revenue recognition have not been met. The Company performs an analysis of the estimated number of days of sales in-transit to customers at the end of each period based on a weighted-average analysis of commercial delivery terms that includes drop-shipment arrangements. This analysis is the basis upon which the Company estimates the amount of sales in-transit at the end of the period and adjusts revenue and the related costs to reflect only what has been received by the customer. Changes in delivery patterns may result in a different number of business days used in making this adjustment and could have a material impact on the Company’s revenue recognition for the period. Sales Taxes Sales tax amounts collected from customers for remittance to governmental authorities are presented on a net basis in the Consolidated Statements of Operations. Advertising Advertising costs are generally charged to expense in the period incurred. Cooperative reimbursements from vendors are recorded in the period the related advertising expenditure is incurred. The Company classifies vendor consideration as a reduction to Cost of sales. Equity-Based Compensation The Company measures all equity-based payments using a fair-value-based method and records compensation expense over the requisite service period using the straight-line method in its Consolidated Financial Statements. Estimated forfeiture rates have been developed based upon historical experience. Interest Expense Interest expense is recognized in the period incurred at the applicable interest rate in effect. Foreign Currency Translation The Company’s functional currency is the US dollar. The functional currency of the Company’s international operating subsidiaries is generally the same as the corresponding local currency. Assets and liabilities of the international operating subsidiaries are translated at the spot rate in effect at the applicable reporting date. Revenues and expenses of the international operating subsidiaries are translated at the average exchange rates in effect during the applicable period. The resulting foreign currency translation adjustment is recorded as Accumulated other comprehensive loss, which is reflected as a separate component of Stockholders’ equity. Income Taxes Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the Consolidated Financial Statements using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company performs an evaluation of the realizability of deferred tax assets on a quarterly basis. This evaluation requires management to make use of estimates and assumptions and considers all positive and negative evidence and factors, such as the scheduled reversal of temporary differences, the mix of earnings in the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies. The Company accounts for unrecognized tax benefits based upon its assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company reports a liability for unrecognized tax benefits resulting from unrecognized tax benefits taken or expected to be taken in a tax return and recognizes interest and penalties, if any, related to its unrecognized tax benefits in income tax expense. |
Recent Accounting Pronouncements |
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Dec. 31, 2016 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Classification of Certain Cash Receipts and Cash Payments In August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), providing guidance for eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU 2016-15 is effective for the Company beginning in the first quarter of 2018 and allows for early adoption. The Company is currently evaluating the impact the ASU will have on its Consolidated Financial Statements. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the assumptions, models and methods for estimating expected credit losses. This ASU is effective for the Company beginning in the first quarter of 2020 and allows for early adoption beginning in the first quarter of 2019. The Company is currently evaluating the impact the ASU will have on its Consolidated Financial Statements. Improvements to Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, requiring the recognition of the excess tax benefits of stock awards in the provision for income taxes in the income statement when the awards are settled and allowing the Company to repurchase more of an employee's shares for tax withholding purposes than allowed under current guidance, without triggering liability accounting. This ASU also addresses simplifications related to statement of cash flows classification and accounting for forfeitures. This ASU is effective for the Company beginning in the first quarter of 2017 and allows for early adoption. The Company elected to early adopt ASU 2016-09 in the third quarter of 2016, requiring the Company to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. As a result of the adoption of this ASU, the Company recorded a $2 million tax benefit in its Consolidated Financial Statements for the year ended December 31, 2016. Accounting for Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. This ASU is effective for the Company beginning in the first quarter of 2019 and allows for early adoption. Although the Company is currently evaluating the provisions of the ASU to determine how it will be affected, the primary impact of the new ASU will be to record assets and liabilities for current operating leases. Balance Sheet Classification of Deferred Taxes In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, simplifying the presentation of deferred income taxes by requiring all deferred taxes to be presented as noncurrent in the balance sheet. In the first quarter of 2016, the Company elected to early adopt ASU 2015-17 on a prospective basis. The adoption of this ASU did not have a material impact on the Company's Consolidated Financial Statements. Simplifying the Measurement of Inventory In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, amending the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value instead of the lower of cost or market value. This ASU is effective for the Company beginning in the first quarter of 2017, allows for early adoption and must be applied prospectively after the date of adoption. The adoption of this ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements. Revenue Recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which, along with amendments issued in 2015 and 2016, will replace most existing revenue recognition guidance under GAAP and eliminate industry specific guidance. The core principle of the new guidance is that an entity should recognize revenue for the transfer of goods and services equal to an amount it expects to be entitled to receive for those goods and services. The ASU, as amended, will be effective for the Company beginning in the first quarter of 2018, and allows for early adoption in the first quarter of 2017. The new guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company has established a cross-functional implementation. The Company utilized a bottom-up approach to analyze the impact of the standard on its contract portfolio by reviewing the current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its revenue contracts. In addition, the Company identified, and is in the process of implementing, appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new standard. The implementation team has reported the findings and progress of the project to management and the Audit Committee on a frequent basis. The Company will adopt the guidance on January 1, 2018. The current preferred method of adoption is the full retrospective method. The Company’s ability to adopt using the full retrospective method is dependent on system readiness and the completion of its analysis of information necessary to recast prior period financial statements. Based on these factors, the Company may decide to use the cumulative catch-up transition method. While the Company is continuing to assess all potential impacts of the standard, it expects the accounting for bill and hold transactions under the new standard will result in revenue for certain of those arrangements being recognized earlier than under current GAAP. The precise impact will be dependent on contract-specific terms. As of December 31, 2016, total bill and hold transactions deferred on the balance sheet was $78 million. |
Acquisition |
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Acquisition | Acquisition On August 1, 2015, the Company completed the acquisition of CDW UK by purchasing the remaining 65% of its outstanding common stock which increased the Company’s ownership interest from 35% to 100%, and provided the Company control. A summary of the total consideration transferred is as follows:
The recognized amounts of identifiable assets acquired and liabilities assumed, translated using the foreign currency exchange rates on the date of acquisition, are as follows:
Goodwill in the amount of $306 million was recognized in the acquisition of CDW UK and is attributable to the business from new customers and the value of the acquired assembled workforce. The goodwill was allocated to the CDW UK operating segment which is included with Canada in an all other category (“Other”). The full amount of goodwill recognized is not deductible for income tax purposes in the United Kingdom. The unaudited pro forma Consolidated Statements of Operations in the table below summarizes the combined results of operations of the Company and CDW UK, as if the acquisition had been completed on January 1, 2014, and gives effect to pro forma events that are factually supportable and directly attributable to the transaction. The unaudited pro forma results reflect adjustments for equity-based compensation, acquisition and integration costs, incremental intangible asset amortization based on the fair values of each identifiable intangible asset, which are subject to change within the measurement period, pre-acquisition equity earnings, the gain on the remeasurement of the Company’s previously held 35% equity method investment, elimination of pre-acquisition intercompany sales transactions and the impacts of certain other pre-acquisition transactions. Pro forma adjustments were tax-effected at the statutory rates within the applicable jurisdictions. This unaudited pro forma information is presented for informational purposes only and may not be indicative of the historical results of operations that would have been obtained if the acquisition had taken place on January 1, 2014, nor the results that may be obtained in the future. This unaudited pro forma information does not reflect future synergies, integration costs or other such costs or savings. The unaudited pro forma Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 is as follows:
The unaudited pro forma information above reflects the following adjustments:
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Property And Equipment |
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Property And Equipment | Property and Equipment Property and equipment consists of the following:
During 2016, 2015 and 2014, the Company recorded disposals of $50 million, $17 million and $32 million, respectively, to remove assets that were no longer in use from property and equipment. The Company recorded a pre-tax loss of less than $1 million for all periods for certain disposed assets that were not fully depreciated. Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was $38 million, $29 million and $26 million, respectively. |
Goodwill And Other Intangible Assets |
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Goodwill And Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill The changes in goodwill by reportable segment for the years ended December 31, 2016 and 2015 are as follows:
December 1, 2016 Impairment Analysis The Company completed its annual impairment analysis as of December 1, 2016. For the Corporate (which, as of December 1, 2016, included Small Business), Public and Canada reporting units, the Company performed a qualitative analysis. The Company determined that it was more-likely-than-not that the individual fair values of the Corporate, Public and Canada reporting units exceeded the respective carrying values. As a result of this determination, the quantitative two-step impairment analysis was deemed unnecessary. Due to the substantial uncertainty regarding the impact of the Referendum on the United Kingdom’s (“UK”) Membership of the European Union (“EU”), advising for the exit of the UK from Europe, the Company performed a quantitative analysis of the CDW UK reporting unit. Based on the results of the quantitative analysis, the Company determined that the fair value of the CDW UK reporting unit exceeded its carrying value and no impairment existed. December 1, 2015 Impairment Analysis The Company completed its annual impairment analysis as of December 1, 2015 by utilizing a qualitative assessment for all reporting units (which, as of December 1, 2016, included Small Business). The Company determined that it was more-likely-than-not that the fair value of each reporting unit exceeded its carrying value. As a result of this determination, the quantitative two-step impairment analysis was deemed unnecessary. Other Intangible Assets A summary of intangible assets at December 31, 2016 and 2015 is as follows:
During the years ended December 31, 2016 and 2015, the Company recorded disposals of $29 million and $6 million, respectively, to remove fully amortized internally developed software assets that were no longer in use. Amortization expense related to intangible assets for the years ended December 31, 2016, 2015 and 2014 was $216 million, $199 million and $182 million, respectively. Estimated future amortization expense related to intangible assets for the next five years is as follows:
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Inventory Financing Agreements |
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Inventory Financing Agreements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Financing Agreements | Inventory Financing Agreements The Company has entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions, as described below. These amounts are classified separately as Accounts payable-inventory financing on the accompanying Consolidated Balance Sheets. The Company does not incur any interest expense associated with these agreements as balances are paid when they are due. Amounts included in accounts payable-inventory financing are as follows:
As described in Note 8 (Long-Term Debt), the Company’s senior secured asset-based revolving credit facility incorporates an inventory floorplan sub-facility. In connection with the floorplan sub-facility, the Company maintains an inventory financing agreement with a financial intermediary to facilitate the purchase of inventory from certain vendors (the “Revolving Loan inventory financing agreement”). Amounts outstanding under the Revolving Loan inventory financing agreement are unsecured and non-interest bearing. The Company also maintains other inventory financing agreements with financial intermediaries to facilitate the purchase of inventory from certain vendors. As of December 31, 2016 and 2015, amounts owed under other inventory financing agreements were $22 million and $13 million, respectively, of which $3 million and $1 million, respectively, were collateralized by the inventory purchased under these financing agreements and a second lien on the related accounts receivable. |
Lease Commitments |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Commitments | Lease Commitments The Company is obligated under various non-cancelable operating lease agreements for office facilities that generally provide for minimum rent payments and a proportionate share of operating expenses and property taxes and include certain renewal and expansion options. For the years ended December 31, 2016, 2015 and 2014, rent expense under these lease arrangements was $27 million, $25 million and $21 million, respectively. Capital leases included in property and equipment are not material. Future minimum lease payments under non-cancelable operating leases as of December 31, 2016 are as follows:
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Long-Term Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt Long-term debt as of December 31, 2016 and 2015 is as follows:
Senior Secured Asset-backed Revolving Credit Facility (“Revolving Loan”) The Revolving Loan is a $1,250 million senior secured asset-based credit facility that matures on June 6, 2019. The Revolving Loan provides availability for borrowings and issuance of letters of credit. In addition, the Revolving Loan includes an inventory floorplan sub-facility that enables the Company to maintain an inventory financing agreement with a financial intermediary to facilitate the purchase of inventory from certain vendors on more favorable terms than offered directly by the vendors. Borrowings under the Revolving Loan are limited by a borrowing base. As of December 31, 2016, the Company had $1 million of undrawn letters of credit, $533 million reserved for the floorplan sub-facility and a borrowing base of $1,479 million, which is based on the amount of eligible inventory and accounts receivable balances as of November 30, 2016. As of December 31, 2016, the Company could have borrowed up to an additional $716 million under the Revolving Loan. Borrowings are also limited by a minimum liquidity condition, which provides that, if excess cash availability is less than the lower of (i) $125 million and (ii) the greater of (A) 10.0% of the borrowing base and (B) $100 million, the lenders are not required to lend additional amounts under the Revolving Loan unless the consolidated fixed charge coverage ratio, as defined, is at least 1.00 to 1.00. Borrowings under the Revolving Loan bear interest at a variable interest rate plus an applicable margin. The interest rate margin is based on one of two indices, either (i) LIBOR, or (ii) the Alternate Base Rate (“ABR”) with the ABR being the greater of (a) the prime rate, (b) the federal funds effective rate plus 50 basis points or (c) the one-month LIBOR plus 1.00%. The applicable margin varies (1.50% to 2.00% for LIBOR borrowings and 0.50% to 1.00% for ABR borrowings) depending upon average daily excess cash availability under the agreement evidencing the Revolving Loan and is subject to a reduction of 0.25% if, and for as long as, CDW LLC’s corporate credit rating from Standard & Poor’s Rating Services is BB or better and CDW LLC’s corporate family rating from Moody’s Investors Service, Inc. is Ba3 or better (in each case with stable or better outlook). The rate reduction is currently applicable as the Company has met the requirement. CDW UK Revolving Credit Facility (“UK Facility”) The CDW UK Term Loan agreement, discussed below, includes the UK Revolving Credit Facility. The UK Facility is a multi-currency revolving credit facility expiring on August 1, 2021, under which CDW UK is permitted to borrow an aggregate amount of £50 million ($62 million as of December 31, 2016). Senior Secured Term Loan Facility (“Term Loan”) On August 17, 2016, the Company entered into a new seven-year $1,490 million aggregate principal amount Term Loan at a price of 99.5% of par, resulting in a discount of $7 million. Fees of $5 million were capitalized as deferred financing costs. The discount and fees are being amortized over the term of the notes on a straight-line basis. The Term Loan replaced the prior senior secured term loan facility (the “Prior Term Loan Facility”) that had an outstanding aggregate principal amount of $1,490 million. In connection with this refinancing, the Company recorded a loss on extinguishment of long-term debt of $2 million, representing the write-off of a portion of the unamortized deferred financing costs and unamortized discount related to the Prior Term Loan Facility. The Company is required to make quarterly principal payments of 0.25% of the original principal amount on the Term Loan, with remaining principal amount payable at maturity date of April 17, 2023. Borrowings under the Term Loan bear interest at either (a) the alternate base rate (“ABR”) plus a margin or (b) LIBOR plus a margin; provided that for the purposes of the Term Loan, LIBOR shall not be less than 0.75% per annum at any time (“LIBOR Floor”). The margin is based upon a net leverage ratio as defined in the Term Loan which is 1.25% for ABR borrowings and 2.25% for LIBOR borrowings. As of December 31, 2016, an interest rate of 3.25% was in effect, which represents the LIBOR rate of 1.00% plus a 2.25% margin. CDW UK Term Loan On August 1, 2016, the Company entered into a new five-year £56 million ($69 million as of December 31, 2016) aggregate principal amount term loan facility (the “CDW UK Term Loan”), which replaced the prior senior secured term loan facility (the “Prior CDW UK Term Loan Facility”) that had an outstanding aggregate principal amount of £56 million. Fees of less than $1 million were capitalized as deferred financing costs and are being amortized over the term of the loan on a straight-line basis. Commencing during the quarter ending September 30, 2018, the Company is required to make annual principal installments of £5 million with the remaining principal amount payable on the maturity date of August 1, 2021. Borrowings under the CDW UK Term Loan bear interest at LIBOR plus a margin, payable quarterly on the last day of each March, June, September and December. As of December 31, 2016, an interest rate of 1.77% was in effect, which represents LIBOR plus a 1.40% margin. In connection with this refinancing, the Prior CDW UK Term Loan Facility was amended to include both the CDW UK Term Loan and a £50 million ($62 million as of December 31, 2016) revolving credit facility (the “CDW UK Revolving Credit Facility”). 6.0% Senior Notes due 2022 (“2022 Senior Notes”) At December 31, 2016, the outstanding principal amount of the 2022 Senior Notes was $600 million. The 2022 Senior Notes will mature on August 15, 2022 and bear interest at a rate of 6.0% per annum, payable semi-annually on February 15 and August 15 of each year. The first interest payment date was February 15, 2015. 5.0% Senior Notes due 2023 (“2023 Senior Notes”) At December 31, 2016, the outstanding principal amount of the 2023 Senior Notes was $525 million. On March 3, 2015, CDW LLC and CDW Finance Corporation, as co-issuers, completed the issuance of $525 million aggregate principal amount of 2023 Senior Notes at par. Fees of $7 million related to the 2023 Senior Notes were capitalized as deferred financing costs and are being amortized over the term of the notes on a straight-line basis. The 2023 Notes will mature on September 1, 2023 and bear interest rate of 5.0% per annum, payable semi-annually on March 1 and September 1 of each year. 5.5% Senior Notes due 2024 (“2024 Senior Notes”) At December 31, 2016, the outstanding principal amount of the 2024 Senior Notes was $575 million. The 2024 Senior Notes will mature on December 1, 2024 and bear interest at a rate of 5.5% per annum, payable semi-annually on June 1 and December 1 of each year. Debt Guarantors, Covenants and Restrictions CDW LLC is the borrower under the Term Loan and Revolving Loan. CDW LLC and CDW Finance Corporation are the co-issuers of the 2022, 2023 and 2024 Senior Notes (“Senior Notes”). The obligations under the Term Loan, the Revolving Loan and the Senior Notes are guaranteed by Parent and each of CDW LLC’s direct and indirect, wholly owned, US subsidiaries (the “Guarantors”). The Revolving Loan is collateralized by a first priority interest in inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 6 (Inventory Financing Agreements) deposits, and accounts receivable, and a second priority interest in substantially all US assets. The Term Loan is collateralized by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 6 (Inventory Financing Agreements) deposits, and accounts receivable, and by a first priority interest in substantially all other U.S. assets. As of December 31, 2016, the Company remained in compliance with the covenants under its various credit agreements. The Term Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of the Guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations or engage in certain transactions with affiliates. As of December 31, 2016, the amount of CDW’s restricted payment capacity under the Term Loan was $892 million. However, the Company is separately permitted to make restricted payments, so long as the total net leverage ratio is less than 3.25 on a pro forma basis. The total net leverage ratio was 2.68 as of December 31, 2016. Each of the Senior Notes indentures contain negative covenants that, among other things, place restrictions and limitations on the ability of the Guarantors to enter into sale and lease-back transactions, incur additional secured indebtedness and create liens. The indenture governing each of the Senior Notes do not contain any financial covenants. The CDW UK Term Loan Agreement imposes restrictions on CDW UK's ability to transfer funds to the Company through the payment of dividends, repayment of intercompany loans, advances or subordinated debt that require, among other things, the maintenance of a minimum net leverage ratio. As of December 31, 2016, the amount of restricted payment capacity under the CDW UK Term Loan was $131 million. Long-Term Debt Maturities A summary of Long term debt maturities is as follows:
Fair Value The fair values of the Senior Notes were estimated using quoted market prices for identical liabilities that are traded in over-the-counter secondary markets that are not considered active. The fair value of the Term Loan was estimated using dealer quotes for identical liabilities in markets that are not considered active. The Senior Notes and Term Loan are classified as Level 2 within the fair value hierarchy. The carrying value of the CDW UK Term Loan was £56 million ($69 million), which approximated fair value due to the short period of time between the issuance of this loan on August 1, 2016 and December 31, 2016. The fair value of the CDW UK Term Loan was estimated using a discounted cash flow analysis based on current incremental borrowing rates for similar arrangements. The approximate fair values and related carrying values of the Company's long-term debt, including current maturities and excluding unamortized discount and unamortized deferred financing costs, were as follows:
Interest Rate Cap Agreements In order to manage the risk associated with changes in interest rates on borrowings under the Term Loan, the Company maintains interest rate cap agreements. During the year ended December 31, 2016, the Company entered into interest rate cap agreements at a rate of 1.5% with a combined notional value of $1,400 million. The Company paid the counterparties premiums totaling $2 million in exchange for the right to receive payments equal to the amount, if any, by which the three-month LIBOR exceeds 1.5% during the agreement period. These interest rate cap agreements are effective from January 17, 2017 to December 31, 2018. These interest rate cap agreements replaced the previous interest rate cap agreements with the same notional amount which expired in January 2017. The Company’s interest rate cap agreements have not been designated as cash flow hedges for GAAP accounting purposes. The interest rate cap agreements are recorded at fair value on the Company’s consolidated balance sheet in Other Assets each period, with changes in fair value recorded directly to interest expense in the Company’s Consolidated Statements of Operations. The fair value of the Company’s interest rate cap agreements is classified as Level 2 in the fair value hierarchy. The valuation of the interest rate cap agreements is derived by using a discounted cash flow analysis on the expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. This analysis reflects the contractual terms of the interest rate cap agreements, including the period to maturity, and uses observable market-based inputs, including LIBOR curves and implied volatilities. The Company also incorporates insignificant credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. The counterparty credit spreads are based on publicly available credit information obtained from a third party credit data provider. The fair value of the interest rate cap agreements was $5 million and less than $1 million at December 31, 2016 and 2015 respectively. |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Income before income taxes was taxed under the following jurisdictions:
Components of Income tax expense (benefit) consist of the following:
The reconciliation between the statutory tax rate expressed as a percentage of income before income taxes and the effective tax rate is as follows:
The tax effect of temporary differences that give rise to the net deferred income tax liability is presented below:
The Company has state and international income tax net operating losses of $41 million, which will expire at various dates from 2017 through 2033 and state tax credit carryforwards of $15 million, which expire at various dates from 2018 through 2021. Due to the nature of the CDW UK acquisition, the Company has provided US income taxes of $31 million on the excess of the financial reporting value of the investment over the corresponding tax basis. As the Company is indefinitely reinvested in its UK business, it will not provide for any additional US income taxes on the undistributed earnings of the UK business. The Company has recognized deferred tax liabilities of $2 million as of December 31, 2016 related to withholding taxes on earnings of its Canadian business which are not considered to be indefinitely reinvested. In the ordinary course of business, the Company is subject to review by domestic and foreign taxing authorities, including the Internal Revenue Service (“IRS”). In general, the Company is no longer subject to audit by the IRS for tax years through 2012 and state, local or foreign taxing authorities for tax years through 2011. Various other taxing authorities are in the process of auditing income tax returns of the Company and its subsidiaries. The Company does not anticipate that any adjustments from the audits would have a material impact on its consolidated financial position, results of operations or cash flows. |
Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity The Company has completed the following secondary public offerings during the years ended December 31, 2014 and 2015, whereby certain selling stockholders sold shares of common stock to the underwriters. The Company did not receive any proceeds from these sales of shares.
Share Repurchase Program The Company has a share repurchase program under which the Company may repurchase shares of its common stock in the open market or through privately negotiated other transactions, depending on share price, market conditions and other factors. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and repurchases may be commenced or suspended from time to time without prior notice. As of December 31, 2016, the Company has $642 million remaining under this program. On May 4, 2016, the Company announced that its Board of Directors authorized a $750 million increase to the Company’s share repurchase program under which the Company may repurchase shares of its common stock in the open market through privately negotiated or other transactions, depending on share price, market conditions and other factors. |
Equity-Based Compensation |
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Share-based Arrangements with Employees and Nonemployees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-Based Compensation | Equity-Based Compensation Equity-based compensation expense, which is recorded in Selling and administrative expenses in the Consolidated Statements of Operations, for the years ended December 31, 2016, 2015 and 2014 was as follows:
The total unrecognized compensation cost related to nonvested awards was $40 million at December 31, 2016 and is expected to be recognized over a weighted-average period of 1.7 years. 2013 Long-Term Incentive Plan The 2013 Long-Term Incentive Plan (“2013 LTIP”) provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock and performance awards. The maximum aggregate number of shares that may be issued under the 2013 LTIP is 15,500,000 shares of the Company’s common stock, in addition to the 3,798,508 shares of restricted stock granted in exchange for unvested Class B Common Units in connection with the Company’s IPO in 2013. As of December 31, 2016, 7,977,223 shares were available for issuance under the 2013 LTIP which was approved by the Company’s pre-IPO shareholders. Authorized but unissued shares are reserved for issuance in connection with equity-based awards. Stock Options The exercise price of a stock option granted is equal to the fair value of the underlying stock on the date of the grant. Stock options have a contractual term of 10 years and generally vest ratably over three years. To estimate the fair value of options granted, the Company uses the Black-Scholes option pricing model. The weighted-average assumptions used to value the stock options granted during the years ended December 31, 2016, 2015 and 2014 were as follows:
Stock option activity for the year ended December 31, 2016 was as follows:
(1) The total intrinsic value of stock options exercised during the years ended December 31, 2016, 2015 and 2014 was $7 million, $2 million, and $1 million, respectively. Restricted Stock Units (“RSUs”) Restricted stock units represent the right to receive unrestricted shares of the Company’s stock at the time of vesting. RSUs generally cliff-vest at the end of four years. The fair value of RSUs is equal to the closing price of the Company’s common stock on date of grant. RSU activity for the year ended December 31, 2016 was as follows:
Performance Share Units (“PSUs”) As of January 1, 2016, there were 578,595 PSUs outstanding at a weighted-average grant-date fair value of $28.67. During the year ended December 31, 2016, the Company granted 198,637 PSUs under the 2013 LTIP which cliff-vest at the end of three years. The percentage of PSUs that shall vest will range from 0% to 200% of the number of PSUs granted based on the Company’s performance against a cumulative adjusted free cash flow measure and cumulative non-GAAP net income per diluted share measure over a three-year performance period. The weighted-average grant-date fair value of the PSUs granted during the period was $39.91 per unit. During the year ended December 31, 2016, 385,932 PSUs vested at a weighted-average grant-date fair value of $24.40 per unit, and 27,353 PSUs were forfeited at a weighted-average grant-date fair value of $31.54 per unit. At year end December 31, 2016, there were 363,947 PSUs outstanding at a weighted-average grant-date fair value of $38.92 per unit. Performance Share Awards (“PSAs”) During the year ended December 31, 2016, the Company granted 127,336 PSAs under the 2013 LTIP which cliff-vest at the end of three years. The number of PSAs that shall vest will be based on the Company’s performance against a cumulative adjusted free cash flow measure and cumulative non-GAAP net income per diluted share measure over a three-year performance period The weighted-average grant-date fair value of the PSAs granted during the year ended December 31, 2016 was $40.06 per award. During the year ended December 31, 2016, no PSAs were forfeited or vested. Restricted Stock In connection with the IPO, the Company issued restricted shares of the Company’s common stock to former stockholders of CDW Holdings. These shares are subject to any vesting provisions previously applicable to the restrictions associated with the stock of CDW Holdings. Class B Common Unit holders received 3,798,508 shares of restricted stock with respect to Class B Common Units that had not yet vested at the time of the issuance. As of January 1, 2016, there were 92,028 shares of restricted stock outstanding. For the year ended December 31, 2016, 65,287 shares of such restricted stock vested/settled and 689 shares were forfeited. As of December 31, 2016, there were 26,052 shares of unvested stock outstanding. The aggregate fair value of restricted stock that vested during the years ended December 31, 2016, 2015 and 2014 was $1 million, $3 million and $39 million, respectively. Equity Awards Granted by Seller of CDW UK The Company issued 1.6 million shares of CDW common stock as part of the consideration transferred to certain sellers for the acquisition of CDW UK. One of the sellers granted 0.6 million stock options to certain CDW UK coworkers over his shares of CDW common stock received in this transaction. The options are not dilutive for purposes of calculating diluted weighted-average shares outstanding as the underlying shares were issued as part of the consideration transferred and are included within basic weighted-average shares outstanding since the acquisition date. The weighted average grant date fair value of the stock options was $22 million or $35.93 per option. The grant date fair value of the options was determined by calculating the fair value of the common stock that was issued which will eventually settle these options. The exercise price of these stock options is $0.01. The fair value of these stock options has been accounted for as post-combination stock-based compensation, as service is required for the coworkers to retain the awards, and is being amortized over the weighted-average requisite service period. Options that are forfeited prior to vesting will not be available for future option issuances and will revert as consideration to the seller. For further information regarding the acquisition, see Note 3 (Acquisition). |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share The numerator for both basic and diluted earnings per share is Net income. The denominator for basic earnings per share is the weighted-average shares outstanding during the period. A reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding is as follows:
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Coworker Retirement and Other Compensation Benefits |
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Dec. 31, 2016 | |
Compensation Related Costs [Abstract] | |
Coworker Retirement and Other Compensation Benefits | Coworker Retirement and Other Compensation Benefits Profit Sharing Plan and Other Savings Plans The Company has a profit sharing plan that includes a salary reduction feature established under the Internal Revenue Code Section 401(k) covering substantially all coworkers in the United States. In addition, coworkers outside the US participate in other savings plans. Company contributions to the profit sharing and other savings plans are made in cash and determined at the discretion of the Board of Directors. For the years ended December 31, 2016, 2015 and 2014, the amounts expensed for these plans were $23 million, $20 million and $22 million, respectively. Coworker Stock Purchase Plan The Company has a Coworker Stock Purchase Plan (the “CSPP”) that provides the opportunity for eligible coworkers to acquire shares of the Company’s common stock at a 5% discount from the closing market price on the final day of the offering period. There is no compensation expense associated with the CSPP. Restricted Debt Unit Plan On March 10, 2010, the Company established the Restricted Debt Unit Plan (the “RDU Plan”), an unfunded nonqualified deferred compensation plan. Compensation expense related to the RDU Plan was $2 million, $5 million and $9 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016 and 2015, the Company had $30 million and $35 million of liabilities related to the RDU Plan recorded on the Consolidated Balance Sheets, respectively. Unrecognized compensation expense as of December 31, 2016 of approximately $2 million is expected to be recognized in 2017. Payments under the RDU Plan may be impacted if certain significant events occur or circumstances change that would impact the financial condition or structure of the Company. Payment of the principal component of the RDU Plan is expected to be made on October 12, 2017. |
Commitments and Contingencies |
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Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | Commitments and Contingencies The Company is party to various legal proceedings that arise in the ordinary course of its business, which include commercial, intellectual property, employment, tort and other litigation matters. The Company is also subject to audit by federal, state, international, national, provincial and local authorities, and by various partners, group purchasing organizations and customers, including government agencies, relating to purchases and sales under various contracts. In addition, the Company is subject to indemnification claims under various contracts. From time to time, certain customers of the Company file voluntary petitions for reorganization or liquidation under the US bankruptcy laws or similar laws of the jurisdictions for the Company’s business activities outside of the United States. In such cases, certain pre-petition payments received by the Company could be considered preference items and subject to return to the bankruptcy administrator. On October 29, 2015, the Company learned of an investigation by the SEC of the Company’s vendor partner program incentives. The SEC’s investigation is ongoing, and the Company is continuing to cooperate with the SEC in this matter. As of December 31, 2016, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company’s financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters. |
Related Party Transactions |
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Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions During 2015 and 2014, the Company held a 35% non-controlling interest in CDW UK until August 1, 2015 when the Company purchased the remaining 65% of its outstanding common stock. The Company recorded $10 million in Net sales to CDW UK during the normal course of business in 2015 prior to the acquisition of CDW UK. Net sales to CDW UK during the period in 2014 in which the Company held CDW UK as an equity investment were not significant. On November 30, 2015, the Company completed a public offering of 9.2 million shares of its common stock by certain selling stockholders, which included 1.2 million shares sold by the selling stockholders to the underwriters pursuant to the grant of an option that was exercised in full. The Company did not receive any proceeds from the sale of these shares. Upon completion of this offering, the Company purchased from the underwriters 1.0 million of the shares of its common stock that were subject to the offering at a price per share equal to the price paid by the underwriters to the selling stockholders in the offering. On August 18, 2015, the Company completed a public offering of approximately 12.9 million shares of its common stock by certain selling stockholders, which included 1.7 million shares sold by the selling stockholders to the underwriters pursuant to the grant of an option that was exercised in full. The Company did not receive any proceeds from the sale of these shares. Upon completion of this offering, the Company purchased from the underwriters 2.3 million of the shares of its common stock that were subject to the offering at a price per share equal to the price paid by the underwriters to the selling stockholders in the offering. On May 22, 2015, the Company completed a public offering of 11.5 million shares of its common stock by certain selling stockholders, which included 1.5 million shares sold by the selling stockholders to the underwriters pursuant to the grant of an option that was exercised in full. The Company did not receive any proceeds from the sale of these shares. On May 17, 2015, the Company entered into a share repurchase agreement with certain selling stockholders affiliated with Madison Dearborn and Providence Equity pursuant to which it repurchased 2.0 million shares of its common stock from such selling stockholders. This share repurchase was effected in a private, non-underwritten transaction for $36.60 per share, which was equal to the per share price paid by the underwriters to the selling stockholders in connection with the public offering completed on May 22, 2015. On March 20, 2014, the Company repurchased and subsequently canceled $25 million aggregate principal amount of the 2019 Senior Notes from an affiliate of Providence Equity. For additional information, see Note 8 (Long-Term Debt). |
Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company’s segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the Chief Operating Decision Maker for deciding how to allocate resources and for assessing performance. The Company has three reportable segments: Corporate, which is comprised primarily of private sector business customers with more than 250 employees in the US, Small Business, primarily servicing private sector business customers with up to 250 employees, and Public, which is comprised of government agencies and education and healthcare institutions in the US. The Company has two other operating segments: CDW Canada and CDW UK, both of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category (“Other”). Effective January 1, 2016, CDW Advanced Services is no longer an operating segment. Its results have been allocated to the Corporate, Small Business and Public segments to align the Company's financial reporting with the manner in which the Chief Operating Decision Maker assesses performance and makes resource allocation decisions. Segment information reported in prior periods has been reclassified to conform to the current period presentation. The Company has centralized logistics and headquarters functions that provide services to the segments. The logistics function includes purchasing, distribution and fulfillment services to support both the Corporate, Small Business and Public segments. As a result, costs and intercompany charges associated with the logistics function are fully allocated to both of these segments based on a percent of Net sales. The centralized headquarters function provides services in areas such as accounting, information technology, marketing, legal and coworker services. Headquarters’ function costs that are not allocated to the segments are included under the heading of “Headquarters” in the tables below. The Company allocates resources to and evaluates performance of its segments based on Net sales, Income from operations and Adjusted EBITDA, a non-GAAP measure as defined in the Company’s credit agreements. However, the Company has concluded that Income from operations is the more useful measure in terms of discussion of operating results, as it is a GAAP measure. Segment information for Total assets and capital expenditures is not presented, as such information is not used in measuring segment performance or allocating resources between segments. Selected Segment Financial Information Information regarding the Company’s segments for the years ended December 31, 2016, 2015 and 2014 is as follows:
(1) Amounts have been recast to present Small Business as its own operating and reportable segment. Geographic Areas and Revenue Mix The Company did not have Net sales to customers outside of the US exceeding 10% of the Company’s total Net sales in 2016, 2015 and 2014. The Company did not have long-lived assets located outside of the US exceeding 10% of the Company’s total long-lived assets as of December 31, 2016 and 2015, respectively. The following table presents Net sales by major category for the years ended December 31, 2016, 2015 and 2014. Categories are based upon internal classifications.
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Supplemental Guarantor Information |
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Supplemental Guarantor Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Guarantor Information | Supplemental Guarantor Information The 2022 Senior Notes, the 2023 Senior Notes and the 2024 Senior Notes are, and, prior to being redeemed in full, the 2019 Senior Notes were, guaranteed by Parent and each of CDW LLC’s direct and indirect, 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries”). All guarantees by Parent and the Guarantor Subsidiaries are and were joint and several, and full and unconditional; provided that guarantees by the Guarantor Subsidiaries (i) are subject to certain customary release provisions contained in the indentures governing the 2022 Senior Notes, the 2023 Senior Notes and the 2024 Senior Notes and (ii) were subject to certain customary release provisions contained in the indentures governing the 2019 Senior Notes until such indentures were satisfied and discharged in the first quarter of 2015. CDW LLC's 100% owned foreign subsidiaries, CDW International Holdings Limited, which is comprised of CDW UK and Canada (together the “Non-Guarantor Subsidiaries”), do not guarantee the debt obligations. CDW LLC and CDW Finance Corporation, as co-issuers, are 100% owned by Parent and each of the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries are, directly or indirectly, 100% owned by CDW LLC. The following tables set forth Condensed Consolidating Balance Sheets as of December 31, 2016 and 2015, Consolidating Statements of Operations for the years ended December 31, 2016, 2015 and 2014, Condensed Consolidating Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014, and Condensed Consolidating Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014, in accordance with Rule 3-10 of Regulation S-X. The consolidating financial information includes the accounts of CDW Corporation (the “Parent Guarantor”), which has no independent assets or operations, the accounts of CDW LLC (the “Subsidiary Issuer”), the combined accounts of the Guarantor Subsidiaries, the combined accounts of the Non-Guarantor Subsidiaries, and the accounts of CDW Finance Corporation (the “Co-Issuer”) for the periods indicated. The information was prepared on the same basis as the Company’s Consolidated Financial Statements.
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Selected Quarterly Financial Results |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Results | Selected Quarterly Financial Results (unaudited)
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Subsequent Events |
12 Months Ended |
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Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On February 7, 2017, the Company announced that its Board of Directors has declared a quarterly cash dividend of $0.16 per common share to be paid on March 10, 2017 to all stockholders of record as of the close of business on February 24, 2017. On February 23, 2017 the Company priced an offering of $600 million in aggregate principal amount of 5.0% Senior Notes due 2025 (“2025 Senior Notes") priced at par. The sale of the 2025 Senior Notes is expected to be completed on March 2, 2017, subject to customary closing conditions. The Company intends to use the proceeds from the 2025 Senior Notes Offering, together with cash on hand and borrowings under the Revolving Loan, to fund the redemption of all of the outstanding $600 million aggregate principal amount of the 2022 Senior Notes and to pay related fees and expenses. The Company currently expects to issue a notice of redemption to holders of the 2022 Senior Notes upon the closing of the 2025 Senior Notes Offering. On February 28, 2017, the Company completed the refinancing of its Term Loan. As a result of the refinancing, the applicable interest margin on the amount of term loans outstanding was reduced by 0.25% and the LIBOR floor of 0.75% was removed. |
Description of Business and Summary of Significant Accounting Policies (Policies) |
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Dec. 31, 2016 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Description of Business, Policy | Description of Business CDW Corporation (“Parent”) is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions to small, medium and large business, government, education and healthcare customers in North America and the United Kingdom. The Company’s offerings range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. Throughout this report, the terms “the Company” and “CDW” refer to Parent and its 100% owned subsidiaries. Parent has two 100% owned subsidiaries, CDW LLC and CDW Finance Corporation. CDW LLC is an Illinois limited liability company that, together with its 100% owned subsidiaries, holds all material assets and conducts all business activities and operations of the Company. CDW Finance Corporation is a Delaware corporation formed for the sole purpose of acting as co-issuer of certain debt obligations as described in Note 17 (Supplemental Guarantor Information) and does not hold any material assets or engage in any business activities or operations. On August 1, 2015, the Company completed the acquisition of Kelway TopCo Limited (“Kelway”), a UK-based IT solutions provider with global offerings by purchasing the remaining 65% of its outstanding common stock, which increased the Company’s ownership interest from 35% to 100% and provided the Company control. In 2016 Kelway was rebranded CDW UK. For further information regarding the acquisition, see Note 3 (Acquisition) to the accompanying Consolidated Financial Statements. |
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Basis of Presentation, Policy | Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the US Securities and Exchange Commission (“SEC”). |
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Principles of Consolidation, Policy | Principles of Consolidation The Consolidated Financial Statements include the accounts of Parent and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation. |
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Use of Estimates, Policy | Use of Estimates The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. |
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Business Combinations, Policy | Business Combinations The Company accounts for all business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. The Company may utilize third-party valuation specialists to assist the Company in the allocation. Initial purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred. |
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Cash and Cash Equivalents, Policy | Cash and Cash Equivalents Cash and cash equivalents include all deposits in banks and short-term (original maturities of three months or less at the time of purchase), highly liquid investments that are readily convertible to known amounts of cash and are so near maturity that there is insignificant risk of changes in value due to interest rate changes. |
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Accounts Receivable, Policy | Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and typically do not bear interest. The Company provides allowances for doubtful accounts related to accounts receivable for estimated losses resulting from the inability of its customers to make required payments. The Company takes into consideration the overall quality of the receivable portfolio along with specifically-identified customer risks in establishing the allowance. |
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Merchandise Inventory, Policy | Merchandise Inventory Inventory is valued at the lower of cost or market value. Cost is determined using a weighted-average cost method. Price protection is recorded when earned as a reduction to the cost of inventory. The Company decreases the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about future demand and market conditions. |
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Miscellaneous Receivables, Policy | Miscellaneous Receivables Miscellaneous receivables generally consist of amounts due from vendors. The Company receives incentives from vendors related to cooperative advertising, volume rebates, bid programs, price protection and other programs. These incentives generally relate to written vendor agreements with specified performance requirements and are recorded as adjustments to Cost of sales or Merchandise inventory, depending on the nature of the incentive. |
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Property and Equipment, Policy | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. The Company calculates depreciation expense using the straight-line method over the estimated useful lives of the assets. Property and equipment are reviewed annually to determine whether there is any impairment. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. Leasehold improvements are amortized over the shorter of their estimated useful lives or the initial lease term. Expenditures for major renewals and improvements that extend the useful life of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
The Company has asset retirement obligations associated with commitments to return property subject to the terms of operating leases to its original condition upon lease termination. The Company’s asset retirement liability was less than $1 million and $2 million at December 31, 2016 and 2015, respectively. |
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Equity Investments, Policy | Equity Investments If the Company is not required to consolidate its investment in another entity because it does not have control, the Company uses the equity method if it (i) can exercise significant influence over the other entity and (ii) holds common stock of the other entity. Under the equity method, investments are carried at cost, plus or minus the Company’s share of equity in the increases and decreases in the investee’s net assets after the date of acquisition and adjustments for basis differences. The Company’s share of the income or loss of equity method investees is included in Other income (expense), net in the Consolidated Statements of Operations. |
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Goodwill, Policy | Goodwill The Company performs an evaluation of goodwill, utilizing either a quantitative or qualitative impairment test, on an annual basis, or more frequently if circumstances indicate a potential impairment. The annual test for impairment is conducted as of December 1. The Company’s reporting units used to assess potential goodwill impairment are the same as its operating segments. Under a quantitative assessment, testing for impairment of goodwill is a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill to determine the amount of impairment loss. Fair value of a reporting unit is determined by using a weighted combination of an income approach (75%) and a market approach (25%), as this combination is considered the most indicative of the Company’s fair value in an orderly transaction between market participants. Under the income approach, the Company determines fair value based on estimated future cash flows of a reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn. The estimated future cash flows of each reporting unit is based on internally generated forecasts for the remainder of the respective reporting period and the next ten years. The Company uses a range of 2.0%-3.5% long-term assumed consolidated annual Net sales growth rate for periods after the ten-year forecast. Under the market approach, the Company utilizes valuation multiples derived from publicly available information for guideline companies to provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. The valuation multiples are applied to the reporting units. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including Net sales growth rates, gross margins, operating margins, discount rates and future market conditions, among others. Any changes in the judgments, estimates or assumptions used could produce significantly different results. Under a qualitative assessment, the most recent quantitative assessment is the starting point to determine if it is more- likely-than-not that the reporting unit’s goodwill is impaired. As part of this qualitative assessment, the Company assesses relevant events and circumstances including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, changes in share price and entity-specific events. |
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Intangible Assets, Policy | Intangible Assets Intangible assets with determinable lives are amortized on a straight-line basis over their respective estimated useful lives. The cost of computer software developed or obtained for internal use is capitalized and amortized on a straight-line basis over the estimated useful life of the software. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value. In addition, each quarter, the Company evaluates whether events and circumstances warrant a revision to the remaining estimated useful life of each of these intangible assets. If the Company were to determine that a change to the remaining estimated useful life of an intangible asset was necessary, then the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life. The following table shows estimated useful lives of definite-lived intangible assets:
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Deferred Financing Costs, Policy | Deferred Financing Costs Deferred financing costs, such as underwriting, financial advisory, professional fees and other similar fees are capitalized and recognized in Interest expense, net over the estimated life of the related debt instrument using the effective interest method or straight-line method, as applicable. The Company classifies deferred financing costs as a direct deduction from the carrying value of the long-term debt liability on the Consolidated Balance Sheets, except for deferred financing costs associated with line-of-credit arrangements which are presented as an asset, within “Other assets” on the Consolidated Balance Sheets. |
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Derivatives, Policy | Derivatives The Company has entered into interest rate cap agreements for the purpose of economically hedging its exposure to fluctuations in interest rates. These derivatives are recorded at fair value on the Consolidated Balance Sheets. The Company’s interest rate cap agreements are not designated as cash flow hedges of interest rate risk. Changes in fair value of the derivatives are recorded directly to Interest expense, net in the Consolidated Statements of Operations. |
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Fair Value Measurements, Policy | Fair Value Measurements Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established for valuation inputs to prioritize the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 – observable inputs such as quoted prices for identical instruments traded in active markets. Level 2 – inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques. |
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Accumulated Other Comprehensive Loss, Policy | Accumulated Other Comprehensive Loss Foreign currency translation adjustments are included in Stockholders’ equity under Accumulated other comprehensive loss. |
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Revenue Recognition, Policy | Revenue Recognition The Company is a primary distribution channel for a large group of vendors and suppliers, including original equipment manufacturers (“OEMs”), software publishers and wholesale distributors. The Company records revenue from sales transactions when title and risk of loss are passed to the customer, there is persuasive evidence of an arrangement for sale, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. The Company’s shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed to the customer. Revenues from the sales of hardware products and software licenses are generally recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales. These items can be delivered to customers in a variety of ways, including (i) as physical product shipped from the Company’s warehouse, (ii) via drop-shipment by the vendor or supplier, or (iii) via electronic delivery for software licenses. At the time of sale, the Company records an estimate for sales returns and allowances based on historical experience. The Company’s vendor partners warrant most of the products the Company sells. The Company leverages drop-shipment arrangements with many of its vendors and suppliers to deliver products to its customers without having to physically hold the inventory at its warehouses, thereby increasing efficiency and reducing costs. The Company recognizes revenue for drop-shipment arrangements on a gross basis upon delivery to the customer with contract terms that typically specify F.O.B. destination. Revenue from professional services is either recognized as provided for services billed at an hourly rate, recognized using a percentage of completion model for fixed fee project work or recognized using a proportional performance model for services provided at a fixed fee. Revenues for cloud computing solutions including Software as a Service (“SaaS”) and Infrastructure as a Service (“IaaS”) arrangements with one time invoicing to the customer are recognized at the time of invoice. Revenues for data center services such as managed and remote managed services, server co-location, internet connectivity, data backup and storage, and SaaS and IaaS arrangements where the customer is invoiced over time are recognized over the period service is provided. The Company also sells certain products for which it acts as an agent. Products in this category include the sale of third-party services, warranties, software assurance (“SA”) and third-party hosted SaaS and IaaS arrangements. SA is a product that allows customers to upgrade, at no additional cost, to the latest technology if new applications are introduced during the period that the SA is in effect. These sales do not meet the criteria for gross sales recognition, and thus are recognized on a net basis at the time of sale. Under Net sales recognition, the cost paid to the vendor or third-party service provider is recorded as a reduction to sales, resulting in Net sales being equal to the gross profit on the transaction. The Company’s larger customers are offered the opportunity by certain of its vendors to purchase software licenses and SA under enterprise agreements (“EAs”). Under EAs, customers are considered to be compliant with applicable license requirements for the ensuing year, regardless of changes to their employee base. Customers are charged an annual true-up fee for changes in the number of users over the year. With most EAs, the Company’s vendors will transfer the license and bill the customer directly, paying resellers such as the Company an agency fee or commission on these sales. The Company records these fees as a component of Net sales as earned and there is no corresponding cost of sales amount. In certain instances, the Company bills the customer directly under an EA and accounts for the individual items sold based on the nature of the item. The Company’s vendors typically dictate how the EA will be sold to the customer. The Company also sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a separate unit of accounting, total arrangement consideration is allocated based upon the relative selling prices of each element. The allocated arrangement consideration is recognized as revenue in accordance with the principles described above. Relative selling prices are determined by using vendor specific objective evidence (“VSOE”) if it exists. Otherwise, selling prices are determined using third-party evidence (“TPE”). If neither VSOE or TPE is available, the Company uses its best estimate of selling prices. The Company records freight billed to its customers as Net sales and the related freight costs as a Cost of sales. Deferred revenue includes (1) payments received from customers in advance of providing the product or performing services and (2) amounts deferred if other conditions of revenue recognition have not been met. The Company performs an analysis of the estimated number of days of sales in-transit to customers at the end of each period based on a weighted-average analysis of commercial delivery terms that includes drop-shipment arrangements. This analysis is the basis upon which the Company estimates the amount of sales in-transit at the end of the period and adjusts revenue and the related costs to reflect only what has been received by the customer. Changes in delivery patterns may result in a different number of business days used in making this adjustment and could have a material impact on the Company’s revenue recognition for the period. |
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Sales Taxes, Policy | Sales Taxes Sales tax amounts collected from customers for remittance to governmental authorities are presented on a net basis in the Consolidated Statements of Operations. |
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Advertising, Policy | Advertising Advertising costs are generally charged to expense in the period incurred. Cooperative reimbursements from vendors are recorded in the period the related advertising expenditure is incurred. The Company classifies vendor consideration as a reduction to Cost of sales. |
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Equity-Based Compensation, Policy | Equity-Based Compensation The Company measures all equity-based payments using a fair-value-based method and records compensation expense over the requisite service period using the straight-line method in its Consolidated Financial Statements. Estimated forfeiture rates have been developed based upon historical experience. |
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Interest Expense, Policy | Interest Expense Interest expense is recognized in the period incurred at the applicable interest rate in effect. |
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Foreign Currency Translation, Policy | Foreign Currency Translation The Company’s functional currency is the US dollar. The functional currency of the Company’s international operating subsidiaries is generally the same as the corresponding local currency. Assets and liabilities of the international operating subsidiaries are translated at the spot rate in effect at the applicable reporting date. Revenues and expenses of the international operating subsidiaries are translated at the average exchange rates in effect during the applicable period. The resulting foreign currency translation adjustment is recorded as Accumulated other comprehensive loss, which is reflected as a separate component of Stockholders’ equity. |
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Income Taxes, Policy | Income Taxes Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the Consolidated Financial Statements using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company performs an evaluation of the realizability of deferred tax assets on a quarterly basis. This evaluation requires management to make use of estimates and assumptions and considers all positive and negative evidence and factors, such as the scheduled reversal of temporary differences, the mix of earnings in the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies. The Company accounts for unrecognized tax benefits based upon its assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company reports a liability for unrecognized tax benefits resulting from unrecognized tax benefits taken or expected to be taken in a tax return and recognizes interest and penalties, if any, related to its unrecognized tax benefits in income tax expense. |
Description of Business and Summary of Significant Accounting Policies (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | The estimated useful lives of property and equipment are as follows:
Property and equipment consists of the following:
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Schedule of Finite-Lived Intangible Assets | The following table shows estimated useful lives of definite-lived intangible assets:
A summary of intangible assets at December 31, 2016 and 2015 is as follows:
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Schedule of Accumulated Other Comprehensive Loss | The components of accumulated other comprehensive loss are as follows:
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Acquisition (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | A summary of the total consideration transferred is as follows:
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination | The recognized amounts of identifiable assets acquired and liabilities assumed, translated using the foreign currency exchange rates on the date of acquisition, are as follows:
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Business Acquisition, Pro Forma Information | The unaudited pro forma Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 is as follows:
The unaudited pro forma information above reflects the following adjustments:
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Property And Equipment (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | The estimated useful lives of property and equipment are as follows:
Property and equipment consists of the following:
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Goodwill And Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The changes in goodwill by reportable segment for the years ended December 31, 2016 and 2015 are as follows:
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Schedule of Finite-Lived Intangible Assets | The following table shows estimated useful lives of definite-lived intangible assets:
A summary of intangible assets at December 31, 2016 and 2015 is as follows:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated future amortization expense related to intangible assets for the next five years is as follows:
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Inventory Financing Agreements (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Financing Agreements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Financing Agreements | Amounts included in accounts payable-inventory financing are as follows:
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Lease Commitments (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases of Lessee Disclosure | Future minimum lease payments under non-cancelable operating leases as of December 31, 2016 are as follows:
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Long-Term Debt Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Value of Long-Term Debt | Long-term debt as of December 31, 2016 and 2015 is as follows:
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Schedule of Long-term Debt Maturities | A summary of Long term debt maturities is as follows:
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Schedule of Carrying Values and Estimated Fair Values of Debt Instruments | The approximate fair values and related carrying values of the Company's long-term debt, including current maturities and excluding unamortized discount and unamortized deferred financing costs, were as follows:
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Income Taxes Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Tax, Domestic and Foreign | Income before income taxes was taxed under the following jurisdictions:
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Schedule of Components of Income Tax Expense (Benefit) | Components of Income tax expense (benefit) consist of the following:
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Schedule of Effective Income Tax Rate Reconciliation | The reconciliation between the statutory tax rate expressed as a percentage of income before income taxes and the effective tax rate is as follows:
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Schedule of Deferred Tax Assets and Liabilities | The tax effect of temporary differences that give rise to the net deferred income tax liability is presented below:
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Stockholders' Equity (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Secondary Offerings | The Company has completed the following secondary public offerings during the years ended December 31, 2014 and 2015, whereby certain selling stockholders sold shares of common stock to the underwriters. The Company did not receive any proceeds from these sales of shares.
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Equity-Based Compensation (Tables) |
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Share-based Arrangements with Employees and Nonemployees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Equity-Based Compensation Expense | Equity-based compensation expense, which is recorded in Selling and administrative expenses in the Consolidated Statements of Operations, for the years ended December 31, 2016, 2015 and 2014 was as follows:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The weighted-average assumptions used to value the stock options granted during the years ended December 31, 2016, 2015 and 2014 were as follows:
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Schedule of Stock Options Roll Forward | Stock option activity for the year ended December 31, 2016 was as follows:
(1) The total intrinsic value of stock options exercised during the years ended December 31, 2016, 2015 and 2014 was $7 million, $2 million, and $1 million, respectively. |
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | RSU activity for the year ended December 31, 2016 was as follows:
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Earnings Per Share (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares | A reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding is as follows:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Information regarding the Company’s segments for the years ended December 31, 2016, 2015 and 2014 is as follows:
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Revenue from External Customers by Products and Services | The following table presents Net sales by major category for the years ended December 31, 2016, 2015 and 2014. Categories are based upon internal classifications.
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Supplemental Guarantor Information (Tables) |
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Supplemental Guarantor Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Condensed Balance Sheet |
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Schedule of Condensed Income Statement |
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Schedule of Condensed Comprehensive Income (Loss) |
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Schedule of Condensed Cash Flow Statement |
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Selected Quarterly Financial Results (Tables) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information |
|
Description of Business and Summary of Significant Accounting Policies Description of Business (Details) - subsidiary |
Dec. 31, 2016 |
Aug. 01, 2015 |
---|---|---|
Business Acquisition [Line Items] | ||
Number of owned subsidiaries | 2 | |
Kelway TopCo Limited | ||
Business Acquisition [Line Items] | ||
Percent of outstanding common stock purchased | 65.00% | |
Non-controlling interest held | 35.00% | |
Total percentage owned, after acquisition | 100.00% |
Description of Business and Summary of Significant Accounting Policies Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
---|---|---|---|---|
Stockholders' equity | $ 1,045.5 | $ 1,095.9 | $ 936.5 | $ 711.7 |
Foreign currency translation | ||||
Stockholders' equity | (139.6) | (61.1) | (16.6) | |
Accumulated Other Comprehensive (Loss) Income | ||||
Stockholders' equity | $ (139.6) | $ (61.1) | $ (16.6) | $ (6.3) |
Recent Accounting Pronouncements (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Tax benefit | $ (1.6) | $ 0.0 | $ 0.0 |
Accounting Standards Update 2016-09 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Tax benefit | 2.0 | ||
Bill and Hold Transaction | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Bill and hold transactions, deferred | $ 78.0 |
Acquisition Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Aug. 01, 2015 |
Dec. 31, 2015 |
|
Business Acquisition [Line Items] | ||
Goodwill | $ 305.2 | |
CDW UK | ||
Business Acquisition [Line Items] | ||
Goodwill | $ 306.0 | |
Percent of outstanding common stock purchased | 65.00% | |
Non-controlling interest held | 35.00% | |
Total percentage owned, after acquisition | 100.00% |
Acquisition Fair Value of Consideration Transferred (Details) - USD ($) shares in Millions, $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Aug. 01, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Business Acquisition [Line Items] | ||||
Shares issued during acquisition | 1.6 | |||
Gain on remeasurement of equity investment | $ 0.0 | $ 98.1 | $ 0.0 | |
CDW UK | ||||
Business Acquisition [Line Items] | ||||
Cash | $ 291.6 | |||
Fair value of CDW common stock | 33.2 | |||
Fair value of previously held equity investment on the date of acquisition | 174.9 | |||
Total consideration | $ 499.7 | |||
Restriction period for common shares issued | 3 years | |||
Weighted-average service period of options issued by one of the sellers to certain coworkers over shares of the seller's common stock received as part of consideration from acquisition | 3 years 2 months 12 days | |||
Non-controlling interest held | 35.00% | |||
Gain on remeasurement of equity investment | $ 98.0 |
Acquisition Fair Value of Recognized Assets and Liabilities Assumed (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Aug. 01, 2015 |
Dec. 31, 2015 |
|
Business Acquisition [Line Items] | ||
Goodwill | $ 305.2 | |
CDW UK | ||
Business Acquisition [Line Items] | ||
Cash | $ 27.8 | |
Accounts receivable | 135.7 | |
Merchandise inventory | 27.1 | |
Property and equipment, net | 11.4 | |
Identified intangible assets | 289.8 | |
Other assets | 53.5 | |
Total assets acquired | 545.3 | |
Accounts payable | (86.1) | |
Deferred revenue | (57.2) | |
Other liabilities | (41.7) | |
Deferred tax liabilities | (55.1) | |
Debt | (111.5) | |
Total liabilities assumed | (351.6) | |
Total identifiable net assets | 193.7 | |
Goodwill | 306.0 | |
Total purchase price | $ 499.7 |
Acquisition Acquired Intangible Assets (Details) - CDW UK $ in Millions |
Aug. 01, 2015
USD ($)
|
---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible assets acquired | $ 289.8 |
Customer relationships and contracts | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible assets acquired | $ 260.8 |
Weighted-average amortization period | 13 years |
Customer contracts | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible assets acquired | $ 25.9 |
Weighted-average amortization period | 3 years |
Developed technology | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible assets acquired | $ 1.7 |
Weighted-average amortization period | 2 years |
Trade name | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived intangible assets acquired | $ 1.4 |
Weighted-average amortization period | 1 year |
Acquisition Pro Forma Information (Details) - CDW UK - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Aug. 01, 2015 |
|
Business Acquisition [Line Items] | |||
Net sales | $ 13,507.6 | $ 12,933.1 | |
Net income | $ 363.7 | $ 243.1 | |
Non-controlling interest held | 35.00% |
Property And Equipment (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Property, Plant and Equipment [Abstract] | |||
Land | $ 27.7 | $ 27.7 | |
Machinery and equipment | 43.2 | 56.8 | |
Building and leasehold improvements | 120.4 | 126.7 | |
Computer and data processing equipment | 101.7 | 99.6 | |
Computer software | 10.8 | 10.3 | |
Furniture and fixtures | 23.8 | 29.4 | |
Construction in progress | 20.4 | 23.9 | |
Property and equipment | 348.0 | 374.4 | |
Less: accumulated depreciation | (184.3) | (199.0) | |
Property and equipment, net | 163.7 | 175.4 | |
Property and equipment, disposals recorded (less than) | 50.0 | 17.0 | $ 32.0 |
Pre-tax loss for disposed assets | (1.0) | (1.0) | (1.0) |
Depreciation expense | $ 38.0 | $ 29.0 | $ 26.0 |
Amortization of Intangible Assets (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Amortization of Intangible Assets | $ 216.0 | $ 199.0 | $ 182.0 |
Amortization Expense 2017 | 213.7 | ||
Amortization Expense 2018 | 198.9 | ||
Amortization Expense 2019 | 181.4 | ||
Amortization Expense 2020 | 154.1 | ||
Amortization Expense 2021 | $ 70.8 |
Inventory Financing Agreements (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Financing Agreements [Line Items] | ||
Accounts Payable Inventory Financing | $ 580.4 | $ 439.6 |
Accounts Payable, Inventory Financing | ||
Inventory Financing Agreements [Line Items] | ||
Revolving Loan financing agreement | 558.3 | 427.0 |
Other inventory financing agreements | 22.1 | 12.6 |
Accounts Payable Inventory Financing | 580.4 | 439.6 |
Accounts Payable, Inventory Financing Collateralized [Member] | ||
Inventory Financing Agreements [Line Items] | ||
Other inventory financing agreements | $ 3.0 | $ 1.0 |
Lease Commitments Operating Leases (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Leases [Abstract] | |||
Rent expense under lease arrangements | $ 27.0 | $ 25.0 | $ 21.0 |
2017 | 22.9 | ||
2018 | 21.0 | ||
2019 | 20.6 | ||
2020 | 20.0 | ||
2021 | 13.7 | ||
Thereafter | 42.1 | ||
Total future minimum lease payments | $ 140.3 |
Long-Term Debt - Long-Term Debt Maturities (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Disclosure [Abstract] | ||
2017 | $ 18.4 | |
2018 | 24.8 | |
2019 | 25.1 | |
2020 | 25.3 | |
2021 | 65.4 | |
Thereafter | 3,108.8 | |
Debt, total long-term and short-term | $ 3,267.8 | $ 3,286.5 |
Long-Term Debt - Fair Value of Long-Term Debt (Details) £ in Millions, $ in Millions |
Dec. 31, 2016
GBP (£)
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
---|---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Carrying value of CDW UK Term Loan | $ 3,234.4 | $ 3,259.7 | |
Carrying value | 3,267.8 | 3,286.5 | |
Level 2 | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair value | 3,334.8 | $ 3,330.4 | |
CDW UK Term Loan | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Carrying value of CDW UK Term Loan | £ 56 | $ 69.0 |
Long-Term Debt - Interest Rate Cap Agreements (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Debt Instrument [Line Items] | |||
Premium payments on interest rate cap agreements | $ 2.4 | $ 0.5 | $ 2.1 |
Cap agreement effective 1/1/17-12/31/18 [Member] | |||
Debt Instrument [Line Items] | |||
Interest cap combined notional amount | $ 1,400.0 | ||
Interest cap agreement rate | 1.50% | ||
Premium payments on interest rate cap agreements | $ 2.0 | ||
Fair value of interest rate cap agreements | $ 5.0 | $ 1.0 |
Income Taxes Income Before Income Tax (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ 635.5 | $ 626.4 | $ 366.6 |
Foreign | 36.9 | 20.6 | 21.1 |
Income before income taxes | $ 672.4 | $ 647.0 | $ 387.7 |
Income Taxes Income Tax Expense by Component (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Current Income Tax Expense (Benefit) [Abstract] | |||
Federal | $ 295.7 | $ 258.5 | $ 206.8 |
State | 34.9 | 28.6 | 19.3 |
Foreign | 16.8 | 10.1 | 5.8 |
Total current | 347.4 | 297.2 | 231.9 |
Deferred Income Tax Expense (Benefit) [Abstract] | |||
Domestic | (90.5) | (48.5) | (89.0) |
Foreign | (8.9) | (4.8) | (0.1) |
Total deferred | (99.4) | (53.3) | (89.1) |
Income tax expense | $ 248.0 | $ 243.9 | $ 142.8 |
Income Taxes Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred tax assets: | ||
Equity compensation plans | $ 29.2 | $ 17.0 |
Payroll and benefits | 22.7 | 21.2 |
Deferred interest | 13.9 | 25.0 |
Net operating loss and credit carryforwards, net | 12.7 | 14.1 |
Rent | 11.0 | 10.8 |
Accounts receivable | 8.3 | 6.4 |
Other | 6.2 | 5.9 |
Trade credits | 0.6 | 1.5 |
Total deferred tax assets | 104.6 | 101.9 |
Deferred tax liabilities: | ||
Software and intangibles | 337.4 | 411.0 |
Deferred income | 58.3 | 87.3 |
International investments | 31.3 | 30.4 |
Property and equipment | 30.3 | 30.6 |
Other | 15.3 | 17.3 |
Total deferred tax liabilities | 472.6 | 576.6 |
Deferred tax asset valuation allowance | 1.2 | 0.0 |
Net deferred tax liabilities | $ 369.2 | $ 474.7 |
Income Taxes Narrative (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
| |
Operating Loss Carryforwards [Line Items] | |
Deferred income tax expense related to basis difference in CDW UK | $ 31 |
Deferred tax liability on unremitted CDW UK earnings | 2 |
State and Local Jurisdiction | |
Operating Loss Carryforwards [Line Items] | |
Operating loss carryforwards | 41 |
State tax credit carryforwards | $ 15 |
Stockholders' Equity (Details) - USD ($) $ in Millions |
12 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 09, 2015 |
Nov. 30, 2015 |
Aug. 18, 2015 |
May 22, 2015 |
Dec. 08, 2014 |
Sep. 08, 2014 |
Jun. 04, 2014 |
May 28, 2014 |
Mar. 12, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2016 |
May 04, 2016 |
|
Class of Stock [Line Items] | |||||||||||||
Shares sold by certain selling stockholders | 9,200,000 | 12,900,000 | 11,500,000 | ||||||||||
Amount remaining under repurchase program | $ 642 | ||||||||||||
Additional amount authorized under repurchase program | $ 750 | ||||||||||||
Secondary Offering Shares | |||||||||||||
Class of Stock [Line Items] | |||||||||||||
Shares sold by certain selling stockholders | 8,000,000 | 11,250,000 | 10,000,000 | 15,000,000 | 15,000,000 | 15,000,000 | 10,000,000 | ||||||
Overallotment Shares | |||||||||||||
Class of Stock [Line Items] | |||||||||||||
Shares sold by certain selling stockholders | 1,200,000 | 1,687,500 | 1,500,000 | 2,250,000 | 0 | 2,250,000 | 1,500,000 | ||||||
Exercise period for option to purchase additional shares | 30 days | 30 days |
Earnings Per Share (Details) - shares shares in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Earnings Per Share [Abstract] | |||
Basic weighted-average shares outstanding (in shares) | 163.6 | 170.3 | 170.6 |
Effect of diluted securities | 2.4 | 1.5 | 2.2 |
Diluted weighted-average shares outstanding | 166.0 | 171.8 | 172.8 |
Antidilutive securities excluded from computation of earnings per share (less than) | 1.0 | 1.0 | 1.0 |
Coworker Retirement and Other Compensation Benefits Profit Sharing and 401(K) Plan (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Defined contribution plan expense | $ 23 | $ 20 | $ 22 |
Coworker Retirement and Other Compensation Benefits Coworker Stock Purchase Plan (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Coworker Retirement and Other Compensation Benefits [Line Items] | |||
Equity-based compensation expense | $ 39,200,000 | $ 31,200,000 | $ 16,400,000 |
Coworker Stock Purchase Plan [Member] | |||
Coworker Retirement and Other Compensation Benefits [Line Items] | |||
Employee stock purchase plan discount to market price (as percent) | 5.00% | ||
Equity-based compensation expense | $ 0.0 |
Coworker Retirement and Other Compensation Benefits Restricted Debt Unit Plan (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
RDU Plan, compensation expense | $ 2 | $ 5 | $ 9 |
RDU Plan, liability | 30 | $ 35 | |
2017 | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
RDU Plan, unrecognized compensation expense | $ 2 |
Related Party Transactions (Details) - USD ($) $ / shares in Units, shares in Millions |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Nov. 30, 2015 |
Aug. 18, 2015 |
May 22, 2015 |
Dec. 31, 2016 |
Aug. 01, 2015 |
Mar. 20, 2014 |
|
Related Party Transaction [Line Items] | ||||||
Shares sold by certain selling stockholders | 9.2 | 12.9 | 11.5 | |||
Repurchases of common stock (in shares) | 1.0 | 2.3 | 2.0 | |||
Share repurchase transaction (in dollars per share) | $ 36.60 | |||||
Senior notes due 2019 [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Repurchased aggregate principal amount | $ 25,000,000 | |||||
CDW UK | ||||||
Related Party Transaction [Line Items] | ||||||
Non-controlling interest held | 35.00% | |||||
Percent of outstanding common stock purchased | 65.00% | |||||
Net sales from related parties | $ 10,000,000 | |||||
Over-Allotment Option [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Shares sold by certain selling stockholders | 1.2 | 1.7 | 1.5 |
Selected Quarterly Financial Results (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Segment Reporting Information [Line Items] | |||||||||||
Net sales | $ 3,492.4 | $ 3,708.2 | $ 3,664.6 | $ 3,116.7 | $ 3,418.4 | $ 3,501.1 | $ 3,314.0 | $ 2,755.2 | $ 13,981.9 | $ 12,988.7 | $ 12,074.5 |
Gross profit | 577.9 | 614.3 | 610.5 | 524.5 | 557.6 | 567.2 | 534.5 | 456.5 | 2,327.2 | 2,115.8 | 1,921.3 |
Income (loss) from operations | 197.2 | 237.5 | 223.5 | 161.0 | 179.9 | 204.6 | 205.9 | 151.6 | 819.2 | 742.0 | 673.0 |
Net income | $ 103.2 | $ 125.9 | $ 117.5 | $ 77.8 | $ 89.3 | $ 150.9 | $ 108.2 | $ 54.7 | $ 424.4 | $ 403.1 | $ 244.9 |
Earnings per share, basic (in dollars per share) | $ 0.64 | $ 0.78 | $ 0.71 | $ 0.47 | $ 0.53 | $ 0.89 | $ 0.63 | $ 0.32 | $ 2.59 | $ 2.37 | $ 1.44 |
Earnings per share, diluted (in dollars per share) | 0.63 | 0.76 | 0.70 | 0.46 | 0.52 | 0.88 | 0.63 | 0.32 | 2.56 | 2.35 | 1.42 |
Cash dividends declared per common share (in dollars per share) | $ 0.1600 | $ 0.1075 | $ 0.1075 | $ 0.1075 | $ 0.1075 | $ 0.0675 | $ 0.0675 | $ 0.0675 | $ 0.4825 | $ 0.3100 | $ 0.1950 |
Corporate | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | $ 1,517.7 | $ 1,466.4 | $ 1,490.8 | $ 1,414.9 | $ 1,524.3 | $ 1,499.6 | $ 1,517.9 | $ 1,336.9 | |||
Small Business | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | 291.8 | 282.5 | 288.4 | 277.4 | 270.3 | 265.1 | 280.7 | 273.5 | |||
Public | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | 1,332.3 | 1,640.6 | 1,547.0 | 1,069.4 | 1,294.0 | 1,483.9 | 1,388.5 | 1,017.2 | |||
Public | Government | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | 529.6 | 537.5 | 456.6 | 339.9 | 522.0 | 493.9 | 390.8 | 294.2 | |||
Public | Education | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | 365.9 | 671.4 | 640.0 | 341.0 | 341.2 | 583.3 | 548.9 | 345.4 | |||
Public | Healthcare | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | 436.8 | 431.7 | 450.4 | 388.5 | 430.8 | 406.7 | 448.8 | 377.6 | |||
Other | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net sales | $ 350.5 | $ 318.7 | $ 338.4 | $ 355.0 | $ 329.8 | $ 252.5 | $ 126.9 | $ 127.6 |
Subsequent Events Subsequent Events (Details) - Subsequent Event - USD ($) $ / shares in Units, $ in Millions |
Feb. 28, 2017 |
Feb. 07, 2017 |
Feb. 23, 2017 |
---|---|---|---|
Subsequent Event [Line Items] | |||
Quarterly cash dividend, declared (in dollars per share) | $ 0.1600 | ||
LIBOR | |||
Subsequent Event [Line Items] | |||
Interest rate floor | 0.75% | ||
Senior Notes due 2025 [Member] | |||
Subsequent Event [Line Items] | |||
Debt, long-term and short-term | $ 600 | ||
Interest rate in effect | 5.00% | ||
Senior notes due August 15, 2022 | |||
Subsequent Event [Line Items] | |||
Debt, long-term and short-term | $ 600 | ||
Senior secured term loan facility | |||
Subsequent Event [Line Items] | |||
Basis spread on variable rate (as percent) | 0.25% |
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