CDW 2012 Annual Report Download - page 38

Table of Contents
In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, defined as days of sales
outstanding in accounts receivable plus days of supply in inventory, less days of purchases outstanding in accounts payable. The following table
presents the components of our cash conversion cycle:
The cash conversion cycle decreased to 24 days at December 31, 2012 compared to 27 days at December 31, 2011, driven by
improvements in DSO and DIO. The DSO decline was primarily related to improved collections in the Public segment. The DIO decline was
primarily related to an increase in the percentage of products delivered to customers via drop-
shipment in 2012 compared to 2011, which had the
effect of increasing cost of sales without a corresponding increase in inventory-related working capital.
The cash conversion cycle decreased to 27 days at December 31, 2011 compared to 32 days at December 31, 2010, driven by a six-day
increase in DPO. The increase in DPO reflected a higher combined balance of accounts payable-trade and accounts payable-inventory financing
at December 31, 2011 compared to December 31, 2010 as purchase volumes increased to support higher net sales and we received more
favorable payment terms for payables related to certain vendors. The one-day increase in DSO primarily reflected our overall sales growth and a
higher proportion of government sales in the fourth quarter of 2011 compared to the same period in 2010.
Investing Activities
Net cash used in investing activities in 2012 decreased $14.3 million compared to 2011. This decline was primarily due to a reduction
in cash payments between years of $6.6 million related to interest rate swap agreements, as the $6.6 million paid in 2011 reflected the final
payment upon termination of the swap agreements on January 14, 2011. Capital expenditures were $41.4 million for 2012 and $45.7 million for
2011, primarily for improvements to our information technology systems during both years. During 2012 and 2011, we paid $0.3 million and
$3.7 million, respectively, for new interest rate cap agreements.
Net cash used in investing activities in 2011 decreased $69.4 million compared to 2010. This decline was primarily due to a reduction
in cash payments between years of $71.5 million under our interest rate swap agreements, as the $6.6 million paid in 2011 reflected the final
payment upon termination of the swap agreements. Capital expenditures were $45.7 million for 2011 and $41.5 million for 2010, primarily for
improvements to our information technology systems during both years. During 2011 and 2010, we paid $3.7 million and $5.9 million,
respectively, for new interest rate cap agreements.
Financing Activities
Net cash used in financing activities increased $242.6 million in 2012 compared to 2011. This change was primarily driven by 2011 net
inflows from accounts payable-inventory financing of $250.5 million compared to 2012 outflows of $29.5 million, resulting in a total impact on
the change in cash used in financing activities of $280.0 million from accounts payable-inventory financing. The reduction in cash during 2012
from accounts payable-inventory financing was primarily due to the termination of one of our inventory financing agreements in the first quarter
of 2012, with amounts owed for subsequent purchases being included in accounts payable-trade on the consolidated balance sheet and classified
as cash flows from operating activities on the consolidated statement of cash flows. As discussed below under “Inventory Financing
Arrangements,” in June 2011 we entered into a new inventory financing agreement with a financial intermediary to facilitate the purchase of
inventory from a certain vendor. Inventory purchases from this vendor under the June 2011 inventory financing agreement are included in
accounts payable-inventory financing and reported as cash flows from financing activities. The net impact of our debt transactions resulted in
cash outflows of $310.6 million during 2012 and $346.5 million during 2011 as cash
34
(in days) December 31,
2012
2011 2010
Days of sales outstanding (DSO)
(1)
42
44
43
Days of supply in inventory (DIO)
(2)
14
15
15
Days of purchases outstanding (DPO)
(3)
(32
)
(32
)
(26
)
Cash conversion cycle
24
27
32
(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. Also incorporates components of other miscellaneous receivables.
(2) Represents the rolling three month average of the balance of inventory at the end of the period divided by average daily cost of 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.