CDW 2003 Annual Report Download - page 53

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8. Trade Financing Agreements
We have entered into security agreements with certain financial institutions (“Flooring Companies”) in order
to facilitate the purchase of inventory from various suppliers under certain terms and conditions. The
agreements allow for a maximum credit line of $68.0 million collateralized by inventory purchases financed
by the Flooring Companies. At December 31, 2003 and 2002, we owed the Flooring Companies
approximately $19.6 million and $17.6 million, respectively, which is included in trade accounts payable.
9. Operating Leases and Exit Costs
We are obligated under various operating lease agreements, for sales office facilities that generally provide
for minimum rent payments and a proportionate share of operating expenses and property taxes and include
certain renewal and expansion options. For the years ended December 31, 2003, 2002 and 2001, rent
expense was $11.3 million, $9.8 million and $7.6 million, respectively. Additionally, $888,000, $753,000
and $572,000 of rental payments were charged to the exit liability in 2003, 2002 and 2001, respectively.
Future minimum lease payments are as follows (in thousands):
Years Ended December 31, Amount
2004 $ 6,727
2005 6,688
2006 6,698
2007 6,776
2008 6,973
Thereafter 15,754
Total future minimum lease payments $ 49,616
The table above does not include facilities that we obtained use of as a result of the purchase of selected
U.S. assets of Micro Warehouse in September 2003. These facilities, primarily sales offices in Connecticut,
New Jersey, and Virginia, are leased by Micro Warehouse. Because we intend to use these facilities only
on a short-term basis we are evaluating our future needs and expect to move into new locations during
2004.
In 1996, we recorded a $4.0 million pre-tax charge to operating results for exit costs relating to our leased
Buffalo Grove, Illinois facility. The exit costs consist primarily of the estimated cost to the Company of
subleasing the vacated facility, including holding costs, the estimated costs of restoring the building to its
original condition and certain asset write-offs resulting from the relocation. During 2003, 2002 and 2001,
we charged approximately $898,000, $764,000 and $565,000 against the exit accrual, respectively. These
amounts include cash payments for rent, real estate taxes and restoration, net of sublease payments.
We discontinued use of the Buffalo Grove facility in the fourth quarter of 2002 and sales personnel were
relocated to the Mettawa, Illinois office. In 2002 and 2001, respectively, we recorded $400,000 and
$290,000 of additional pre-tax charges to operating results to cover additional exit costs we anticipated
relating to the Buffalo Grove facility. The Buffalo Grove lease term expired in December 2003.
10. Income Taxes
Pretax income from continuing operations for the years ended December 31, 2003, 2002 and 2001 was taxed
under the following jurisdictions (in thousands):