CDW 2012 Annual Report Download - page 30

Table of Contents
compared to 4.9% in 2011. Operating margin percentage was positively impacted by the decrease in selling and administrative expenses as a
percentage of net sales.
Corporate segment income from operations was $349.0 million in 2012, an increase of $17.4 million , or 5.2% , compared to $331.6
million in 2011. This increase was primarily driven by higher net sales and gross profit margin, partially offset by higher selling and
administrative expenses, resulting in a net increase in segment operating income before allocations of $14.4 million in 2012 compared to 2011.
In addition, Corporate segment income from operations benefited from an increase of $2.5 million in income allocations from our logistics
operations and a decrease of $0.5 million in Headquarters' expense allocations in 2012 compared to 2011. The improved profitability of our
logistics operations was driven by stronger operating leverage given higher purchase volumes while support costs remained flat.
Public segment income from operations was $246.7 million in 2012, an increase of $13.4 million , or 5.7% , compared to $233.3
million in 2011. This increase reflected higher segment operating income before allocations of $4.0 million as a result of increased net sales and
gross profit dollars, partially offset by higher selling and administrative costs. In addition, Public segment income from operations benefited
from an increase of $5.7 million in income allocations from our logistics operations and a decrease in Headquarters’ expense allocations of $3.7
million in 2012 compared to 2011.
Interest expense, net
At December 31, 2012 , our outstanding long-term debt totaled $3,771.0 million, compared to $4,066.0 million at December 31, 2011.
Net interest expense in 2012 was
$307.4 million , a decrease of $16.8 million compared to $324.2 million in 2011. Interest expense in 2011
included a benefit of $19.4 million, due to an adjustment to the long-term accrued interest liability associated with the extinguishment of
$1,078.0 million of senior notes due 2015. The long-term accrued interest liability represents the difference between interest expense previously
recognized under the effective interest method and actual interest paid. Of the remaining net decrease of $36.2 million, $27.2 million was due to
lower effective interest rates and lower debt balances in 2012 compared to the prior year as a result of debt repayment and refinancing activities
completed during 2011 and 2012. The remaining net decrease was primarily attributable to additional interest expense in 2011 related to the
interest rate swaps that terminated in January 2011, higher 2011 mark-to-market losses on interest rate caps, higher amortization of deferred
financing costs in 2011 compared to 2012 and a 2012 benefit related to an adjustment to the long-term accrued interest liability associated with
the extinguishment of $100.0 million of senior subordinated notes due 2017.
Net loss on extinguishments of long
-term debt
During 2012, we recorded a net loss on extinguishments of long-term debt of $17.2 million compared to $118.9 million in 2011.
In February and March 2012, we purchased or redeemed the remaining $129.0 million of senior notes due 2015, funded with the
issuance of an additional $130.0 million of senior notes due 2019. As a result, we recorded a loss on extinguishment of long-term debt of $9.4
million, representing the difference between the purchase or redemption price of the senior notes due 2015 and the net carrying amount of the
purchased debt, adjusted for the remaining unamortized deferred financing costs.
In December 2012, we redeemed $100.0 million aggregate principal amount of senior subordinated notes due 2017 for $106.3 million.
We recorded a loss on extinguishment of long-term debt of $7.8 million representing 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.
In March 2011, we amended our senior secured term loan facility and recorded a loss on extinguishment of long-term debt of $3.2
million, representing a write-off of a portion of the unamortized deferred financing costs on this facility.
In April and May 2011, we purchased $1,078.0 million of senior notes due 2015, funded with the issuance of $1,175.0 million of senior
notes due 2019. As a result, we recorded a loss on extinguishment of long-term debt of $114.1 million, representing the difference between the
purchase price of the senior notes due 2015 at 109% of principal amount and the net carrying amount of the purchased debt, adjusted for a
portion of the unamortized deferred financing costs.
In June 2011, we entered into a new $900.0 million senior secured asset-based revolving credit facility, replacing the existing $800.0
million facility. As a result, we recorded a loss on extinguishment of long-term debt of $1.6 million representing a write-off of a portion of the
unamortized deferred financing costs related to the previous facility.
26