CDW 2012 Annual Report Download - page 41

Table of Contents
On March 11, 2011, we entered into an amendment to the Term Loan, which became effective on March 14, 2011. This amendment,
among other things: (i) reduced the margins with respect to extended loans, (ii) established a LIBOR floor of 1.25% and an ABR floor of 2.25%
with respect to extended loans, (iii) reset the start date for accumulating restricted payments that count against the general limit of $25.0 million
and (iv) provided a 1% prepayment premium for certain repayments or re-pricings of any extended loans for the six-month period following the
effective date of the amendment. In connection with this amendment, we recorded a loss on extinguishment of long-term debt of $3.2 million in
the consolidated statement of operations for the year ended December 31, 2011. This loss represented a write-off of a portion of the unamortized
deferred financing costs related to the Term Loan.
The Term Loan requires us to make certain mandatory prepayments of principal amounts under certain circumstances, including (i) a
prepayment in an amount equal to 50% of our excess cash flow for a fiscal year (the percentage rate of which decreases to 25% when the total
net leverage ratio, as defined in the governing agreement, is less than or equal to 5.5 but greater than 4.5; and decreases to 0% when the total net
leverage ratio is less than or equal to 4.5), and (ii) the net cash proceeds from the incurrence of certain additional indebtedness by us or our
subsidiaries. Excess cash flow is defined as Adjusted EBITDA, plus items such as reductions in working capital, less items such as increases in
working capital, certain taxes paid in cash, interest that will be paid in cash, capital expenditures and repayment of long-term indebtedness. A
mandatory prepayment of approximately $40.0 million will be due in 2013 under the excess cash flow provision with respect to the year ended
December 31, 2012. The payment is due within ten business days of filing this report with the SEC. On January 30, 2013, we made an optional
prepayment of $40.0 million aggregate principal amount. The prepayment was allocated on a pro rata basis between the extended and non-
extended loans. The optional prepayment satisfied the excess cash flow payment requirement. We were required to make a mandatory
prepayment of $201.0 million under the excess cash flow provision with respect to the year ended December 31, 2011. The requirement was
satisfied through $180.0 million of optional prepayments in February 2012 and $21.0 million of mandatory prepayments in March 2012. The
prepayments were allocated on a pro rata basis between the extended and non-extended loans. On March 16, 2011, we made a mandatory
prepayment of $132.0 million with respect to the year ended December 31, 2010, under the excess cash flow provision.
CDW LLC is the borrower under the Term Loan. All obligations under the Term Loan are guaranteed by Parent and each of CDW
LLC's direct and indirect, 100% owned, domestic subsidiaries. The Term Loan is collateralized by a second priority interest in substantially all
inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5 to the consolidated financial
statements), deposits, and accounts receivable, and by a first priority interest in substantially all other assets. The Term Loan contains negative
covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and indirect, 100%
owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make
distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations,
or engage in certain transactions with affiliates.
The Term Loan also includes a senior secured leverage ratio requirement. The senior secured leverage ratio is required to be maintained
on a quarterly basis and is defined as the ratio of senior secured debt (including amounts owed under certain inventory floorplan arrangements)
less cash and cash equivalents, to Adjusted EBITDA, a non-GAAP financial measure, for the most recently ended four fiscal quarters.
Compliance may be determined after giving effect to a designated equity contribution to the Company to be included in the calculation of
Adjusted EBITDA. The senior secured leverage ratio for the four quarters ended December 31, 2012 was required to be at or below 6.75. For the
four quarters ended December 31, 2012, the senior secured leverage ratio was 2.4. The senior secured leverage ratio requirement is a material
component of the Term Loan. Non-compliance with the senior secured leverage ratio requirement would result in a default under the credit
agreement governing the Term Loan and could prevent us from borrowing under our Revolving Loan. If there were an event of default under the
credit agreement governing the Term Loan that was not cured or waived, the lenders under the Term Loan could cause all amounts outstanding
under the Term Loan to be due and payable immediately, which would have a material adverse effect on our financial position and cash flows.
For a discussion of net cash provided by (used in) operating activities, investing activities and financing activities, see “Cash Flows” above. For
a reconciliation of Adjusted EBITDA to net cash provided by (used in) operating activities, see “Selected Financial Data.”
We are required to maintain interest rate derivative arrangements to fix or cap the interest rate on at least 50% of the outstanding
principal amount of the Term Loan through maturity, subject to certain limitations currently in effect. With the interest rate cap agreements in
effect at December 31, 2012 as described in Note 8 to the consolidated financial statements, we have satisfied this requirement through January
14, 2015.
8.0% Senior Secured Notes due 2018 (“Senior Secured Notes”)
The Senior Secured Notes were issued on December 17, 2010 and will mature on December 15, 2018. At December 31, 2012, the
outstanding principal amount of the Senior Secured Notes was $500.0 million.
37