CDW 2012 Annual Report Download - page 35

Table of Contents
The loss from operations for our Headquarters' function of $111.7 million in 2011 was flat compared to the loss from operations of
$110.8 million in 2010.
Interest expense, net
At December 31, 2011, our outstanding long-term debt totaled $4,066.0 million, compared to $4,289.1 million at December 31, 2010.
Net interest expense in 2011 was $324.2 million, a decrease of $67.7 million compared to $391.9 million in 2010. Interest expense was reduced
by $19.4 million in 2011 due to a decrease in 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. The remaining decrease of $48.3 million was primarily due to lower effective interest rates
in 2011 resulting from the termination of our interest rate swaps in January 2011 and the debt refinancing activities completed during the first
half of 2011, partially offset by non-cash gains on hedge ineffectiveness recorded to interest expense in the prior year.
Net (loss) gain on extinguishments of long
-term debt
During 2011, we recorded a net loss on extinguishments of long-
term debt of $118.9 million compared to a net gain on extinguishments
of long-term debt of $2.0 million in 2010.
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 par value 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.
During 2010, we recorded a net gain of $2.0 million on the extinguishments of long-
term debt resulting from two transactions. In March
2010, we repurchased $28.5 million of principal amount of senior subordinated notes due 2017 for a purchase price of $18.6 million. We
recorded a gain of $9.2 million representing the difference between the purchase price, including expenses paid to the debt holders and agent,
and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs. The $28.5 million in
principal amount of senior subordinated notes due 2017 that was repurchased was exchanged for increasing rate notes and subsequently
surrendered to the indenture trustee for cancellation. In December 2010, we extinguished $500.0 million of the outstanding principal balance of
our senior secured term loan facility funded by proceeds from the issuance of 8.0% senior secured notes due 2018. We recorded a loss of $7.2
million on the extinguishment of the senior secured term loan facility, representing a write-
off of a portion of the unamortized deferred financing
costs. There was no additional gain or loss resulting from the paydown of the debt balance, as the cash paid equaled the principal amount of the
debt extinguished.
Income tax (expense) benefit
The effective income tax rate was 39.7% and 21.1% for 2011 and 2010, respectively.
For 2011, the effective tax rate differed from the U.S. federal statutory rate primarily due to the unfavorable impact of permanent
differences relative to pre-
tax income. The effective tax rate for 2010 reflects the unfavorable impact of permanent differences relative to a small
pre-tax loss.
Net income (loss)
Net income was $17.1 million in 2011, compared to a net loss of $29.2 million in 2010.
Adjusted EBITDA
Adjusted EBITDA was $717.3 million in 2011, an increase of $115.4 million, or 19.2%, compared to $601.8 million in 2010. As a
percentage of net sales, Adjusted EBITDA was 7.5% and 6.8% in 2011 and 2010, respectively.
We have included a reconciliation of EBITDA and Adjusted EBITDA for 2011 and 2010 in the table below. EBITDA is defined as
consolidated net income (loss) before interest expense, income tax expense (benefit), depreciation and amortization. Adjusted EBITDA, which is
a measure defined in our credit agreements, means EBITDA adjusted for certain
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