CDW 2014 Annual Report Download - page 96

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the assumptions and resulting fair value of the Class B Common Unit grants for the years ended
December 31, 2013 and 2012:
MPK II Units
Contemporaneous with the Acquisition, the Company agreed with Michael P. Krasny, CDW Corporation founder, former chairman and
CEO and significant selling shareholder, to establish the MPK Plan for the benefit of all of the coworkers of the Company other than
members of senior management who received incentive equity awards under the Plan.
The MPK Plan established an “account” for each eligible participant which was notionally credited with a number of Class A Common
Units of CDW Holdings LLC on October 15, 2007, the day the plan was established. The notional units credited to participants'
accounts were to cliff-vest at the end of ten years, subject to acceleration upon the occurrence of certain events. Notional units granted
under the MPK Plan were valued on the grant date at $1,000
per unit, the fair value equivalent of the Class A Common Units at the time
the awards were granted.
On July 2, 2013, the Company completed an IPO of its common shares. Under the terms of the MPK Plan, vesting accelerated for all
unvested units upon completion of the IPO. The Company recorded a pre-tax charge of $36.7 million for compensation expense related
to the acceleration of the expense recognition for MPK Plan units in the year ended December 31, 2013. In connection with the
completion of the IPO, the Company distributed common stock to each participant and withheld the number of shares of common stock
equal to the required tax withholding for each participant. The Company paid required withholding taxes of $24.0 million to federal,
state and foreign taxing authorities. This amount is reported as a financing activity in the consolidated statement of cash flows and as an
increase to accumulated deficit in the consolidated statement of shareholders' equity for the year ended December 31, 2013. In addition,
the Company paid $4.0 million
of employer payroll taxes that are included as an operating activity in the consolidated statement of cash
flows for the year ended December 31, 2013.
The following table sets forth a summary of pre-IPO equity plan activity for the year ended December 31, 2013 :
In connection with the establishment of the MPK Plan, the Company agreed to make charitable contributions in amounts equal to the
net income tax benefits derived from payouts to participants under the MPK Plan (net of any
87
Years Ended December 31,
Assumptions 2013
2012
Weighted-average grant date fair value
$
119.00
$
125.65
Weighted-average volatility
(1)
65.50
%
65.26
%
Weighted-average risk-free rate
(2)
0.18
%
0.19
%
Dividend yield
0.00
%
0.00
%
(1) Based upon an assessment of the two-year, five-year and implied volatility for the Company’
s selected peer group, adjusted for
the Company’s leverage.
(2)
Based on a composite U.S. Treasury rate.
Class B
Common Units
MPK Plan
Units
Outstanding at January 1, 2013
216,483
66,137
Granted
400
—
Forfeited
(860
)
(2,228
)
Converted/Settled
(1)
(216,023
)
(63,909
)
Outstanding at December 31, 2013 —
—
Vested at December 31, 2013 —
—
(1) As discussed above, the Class B Common Units and MPK Plan Units were converted/settled into shares of the Company's
common stock upon completion of the IPO. The converted Class B Common Units, to the extent unvested at the time of the
IPO, relate to the grants of restricted stock disclosed above.