CDW 2014 Annual Report Download - page 93

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 2013, the Company’s Board of Directors and the Company's sole shareholder at that time, CDW Holdings, approved the
reclassification of the Company’s Class A common shares and Class B common shares into a single class of common shares and a
143.0299613 -for-1 stock split, effective immediately. The par value of the common shares was maintained at $0.01 per share. All
references to common shares and per share amounts in the accompanying consolidated financial statements have been adjusted to
reflect the reclassification and stock split on a retroactive basis.
In June 2013, the Company amended and restated its certificate of incorporation to authorize the issuance of 100,000,000 shares of
preferred stock with a par value of $0.01 . No shares of preferred stock have been issued or are outstanding as of December 31, 2014.
Additionally, the amended and restated certificate of incorporation increased the number of authorized common shares to
1,000,000,000 .
The 2013 Long-Term Incentive Plan (“2013 LTIP”) provides for the grant of incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock, restricted stock units, bonus stock and performance awards. The maximum aggregate number of
shares that may be issued under the 2013 LTIP is 11,700,000 shares of the Company's common stock, in addition to the 3,798,508
shares of restricted stock granted in exchange for unvested Class B Common Units in connection with the Company's IPO, as discussed
below. As of December 31, 2014, 7,541,891 shares were available for issuance under the 2013 LTIP which was approved by the
Company's pre-IPO shareholders. Authorized but unissued shares are reserved for issuance in connection with equity-based awards.
The following table summarizes equity-based compensation expense, which is included in selling and administrative expenses, for the
years ended December 31, 2014, 2013 and 2012 :
The total unrecognized compensation cost related to nonvested awards was $28.9 million at December 31, 2014 and is expected to be
recognized over a weighted-average period of 2.3 years.
Stock Options
During the year ended December 31, 2014 , the Company granted 1,245,513 stock options under the 2013 LTIP. These options vest
annually over three years and have a contractual term of 10 years. The exercise price of a stock option is equal to the fair value of a
share of the Company's common stock on the date of the grant. The Company uses the Black-Scholes option pricing model to estimate
the fair value of stock options granted. The Black-Scholes option pricing model incorporates various assumptions including volatility,
expected term, risk-free interest rates and dividend yields. The weighted-average assumptions used to value the stock options granted
during the years ended December 31, 2014 and 2013 are presented below.
84
10. Equity-
Based Compensation
(in millions)
Year Ended December 31,
2014 2013
(1)
2012
(2)
Equity-based compensation expense
$
16.4
$
46.6
$
22.1
Income tax benefit
(5.1
)
(16.5
)
(2.3
)
Total (net of tax)
$
11.3
$
30.1
$
19.8
(1) Includes pre-tax expense of $36.7 million related to the accelerated vesting of certain equity awards granted prior to our IPO.
All unvested awards granted pursuant to the MPK Coworker Incentive Plan II (the “MPK Plan”) vested in connection with the
IPO as discussed further below in the section labeled "MPK II Units."
(2) Includes pre-tax expense of $6.6 million in connection with the modification of Class B Common Unit awards granted
pursuant to the CDW Holdings LLC 2007 Incentive Equity Plan to the Company’s former Chief Executive Officer, as
discussed further below in the section labeled "Class B Common Units."