CDW 2014 Annual Report Download - page 62

Table of Contents
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.
Allowance for Doubtful Accounts
We record an allowance for doubtful accounts related to trade accounts receivable for estimated losses resulting from the inability of
our customers to make required payments. We take into consideration historical loss experience, the overall quality of the receivable portfolio
and specifically identified customer risks. If actual collections of customer receivables differ from our estimates, additional allowances may be
required which could have an impact on our results of operations.
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. We
perform an evaluation of the realizability of our deferred tax assets on a quarterly basis. This evaluation requires us to use estimates and make
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 we operate, and prudent and feasible tax planning strategies.
We account for unrecognized tax benefits based upon our assessment of whether a tax benefit is more likely than not to be sustained
upon examination by tax authorities. We report a liability for unrecognized tax benefits resulting from unrecognized tax benefits taken or
expected to be taken in a tax return and recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Recent Accounting Pronouncements
The information set forth in Note 2 to the accompanying audited consolidated financial statements included in Part II, Item 8 of this
Form 10-K is incorporated herein by reference.
Subsequent Events
The information set forth in Note 20 to the accompanying audited consolidated financial statements included in Part II, Item 8 of this
Form 10-K is incorporated herein by reference.
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.
As of December 31, 2014
we have ten interest rate cap agreements in effect through January 14, 2015 with a combined notional amount
of $1,150.0 million which entitled the Company to payments from the counterparty of the amount, if any, by which three-
month LIBOR exceeds
a weighted average rate of 2.4% during the agreement period.
During the year ended December 31, 2014
, we entered into 14 additional interest rate cap agreements with a combined notional amount
of $1,000.0 million . These interest rate cap agreements have not been designated as cash flow hedges of interest rate risk for GAAP accounting
purposes. The entire $1,000.0 million notional amount entitles us to payments from the counterparty of the amount, if any, by which three-
month
LIBOR exceeds 2.0% during the agreement period. The interest rate cap agreements are effective from January 14, 2015 through January 14,
2017. See Note 7 to the accompanying audited consolidated financial statements included elsewhere in this report for additional details.
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.
57