CDW 2012 Annual Report Download - page 31

Table of Contents
Income tax expense
Income tax expense was $67.1 million in 2012, compared to $11.2 million in 2011. The effective income tax rate was 36.0% and
39.7%
for 2012 and 2011, respectively.
For 2012, the effective tax rate differed from the U.S. federal statutory rate primarily due to favorable adjustments to state tax credits
which are partially offset by the unfavorable impact of adjustments to deferred taxes due to changes in state tax laws and permanent differences.
For 2011, the effective tax rate differed from the U.S. federal statutory rate primarily due to the unfavorable impact of permanent differences
offset by a benefit for state income taxes. The lower effective tax rate for 2012 as compared to 2011 was primarily driven by the impact of
favorable adjustments to state tax credits in 2012 and the lower rate impact of permanent differences in 2012 due to the significantly greater
amount of pre-tax income.
Net income
Net income was $119.0 million in 2012, compared to $17.1 million in 2011. The 2012 and 2011 results included after tax losses on
extinguishments of long-term debt of $10.5 million and $72.5 million, respectively. Other significant factors and events causing the net changes
from 2011 to 2012 are discussed above.
Adjusted EBITDA
Adjusted EBITDA was $766.6 million in 2012, an increase of $49.3 million , or 6.9% , compared to $717.3 million in 2011. As a
percentage of net sales, Adjusted EBITDA was 7.6% and 7.5% in 2012 and 2011, respectively.
We have included a reconciliation of EBITDA and Adjusted EBITDA for 2012 and 2011 in the table below. EBITDA is defined as
consolidated net income before interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA, which is a measure
defined in our credit agreements, means EBITDA adjusted for certain items which are described in the table below. Both EBITDA and Adjusted
EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's
performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most
directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures used by the Company may differ from
similar measures used by other companies, even when similar terms are used to identify such measures. We believe that EBITDA and Adjusted
EBITDA provide helpful information with respect to our operating performance and cash flows including our ability to meet our future debt
service, capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure
used in certain financial covenants contained in our credit agreements. See “Selected Financial Data” included elsewhere in this report for a
reconciliation of EBITDA to cash flows from operating activities.
27
(in millions) Years Ended December 31,
2012
2011
Net income
$
119.0
$
17.1
Depreciation and amortization
210.2
204.9
Income tax expense
67.1
11.2
Interest expense, net
307.4
324.2
EBITDA
703.7
557.4
Adjustments:
Non-cash equity-based compensation
22.1
19.5
Sponsor fee
5.0
5.0
Consulting and debt-related professional fees
0.6
5.1
Net loss on extinguishments of long-term debt
17.2
118.9
Other adjustments
(1)
18.0
11.4
Total adjustments
62.9
159.9
Adjusted EBITDA
$
766.6
$
717.3
(1)
Other adjustments include certain retention costs, equity investment income and a litigation loss in the fourth quarter of 2012.