CDW 2012 Annual Report Download - page 49

Table of Contents
Item 7A. Quantitative and Qualitative Disclosures of Market Risks
Our market risks relate primarily to changes in interest rates. The interest rates on borrowings under our senior secured asset-based
revolving credit facility and our senior secured term loan facility are floating and, therefore, are subject to fluctuations. In order to manage the
risk associated with changes in interest rates on borrowings under our senior secured term loan facility, we have entered into interest rate
derivative agreements to economically hedge a portion of the cash flows associated with the facility. Our objectives in using interest rate
derivatives are to add stability to interest expense and to manage our exposure to interest rate fluctuations.
W e utilize interest rate caps for the purpose of limiting current and future exposure to interest rate risk on our floating-rate debt under
the senior secured term loan facility.
In November 2012, the Company entered into six interest rate cap agreements with a combined $650.0 million notional amount. Under
these agreements, the Company made premium payments totaling $0.3 million to the counterparties in exchange for the right to receive
payments from them of the amount, if any, by which three-month LIBOR exceeds 1.5% during the agreement period. The cap agreements are
effective from January 14, 2013 through January 14, 2015.
During 2011, the Company entered into four interest rate cap agreements with a combined $500.0 million notional amount. Under the
agreements, the Company made premium payments totaling $3.7 million to the counterparties in exchange for the right to receive payments from
them of the amount, if any, by which three-month LIBOR exceeds 3.5% during the agreement period. The cap agreements are effective from
January 14, 2013 through January 14, 2015.
In April 2010, the Company entered into four interest rate cap agreements with a combined $1,100.0 million notional amount. Under
these agreements, the Company made premium payments totaling $5.9 million to the counterparties in exchange for the right to receive
payments from them of the amount, if any, by which three-month LIBOR exceeds 3.5% during the agreement period. The cap agreements are
effective from January 14, 2011 through January 14, 2013.
These interest rate cap agreements have not been designated as cash flow hedges of interest rate risk for accounting purposes. Instead,
these agreements are recorded at fair value on the Company's consolidated balance sheet each period, with changes in fair value recorded
directly to interest expense, net in the Company's consolidated statements of operations each period.
See “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources -
Contractual Obligations” for information on cash flows, interest rates and maturity dates of our debt obligations.
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