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CDW CORP
FORM 10-K
(Annual Report)
Filed 02/25/16 for the Period Ending 12/31/15
Address 200 N MILWAUKEE AVE
VERNON HILLS, IL 60061
Telephone 8474656000
CIK 0001402057
Symbol CDW
SIC Code 5961 - Catalog and Mail-Order Houses
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2016, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    CDW CORP FORM 10-K (Annual Report) Filed 02/25/16 for the Period Ending 12/31/15 Address Telephone CIK Symbol SIC Code Fiscal Year 200 N MILWAUKEE AVE VERNON HILLS, IL 60061 8474656000 0001402057 CDW 5961 - Catalog and Mail-Order Houses 12/31 http://www.edgar-online.com © Copyright 2016, EDGAR...

  • Page 2
    ... ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 ¨ or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 to For the transition period from Commission File Number 001-35985 CDW...

  • Page 3
    ... Principal Accountant Fees and Services 110 110 110 110 110 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative...

  • Page 4
    ... are made from time to time in our other Securities and Exchange Commission ("SEC") filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. We caution you that the important factors referenced above...

  • Page 5
    ... and advanced service delivery engineers. We are a leading sales channel partner in North America and the United Kingdom for many original equipment manufacturers ("OEMs") and software publishers (collectively, our "vendor partners"), whose products we sell or include in the solutions we offer. We...

  • Page 6
    ...our initial public offering ("IPO"), Parent was owned directly by CDW Holdings LLC ("CDW Holdings"), a company controlled by investment funds affiliated with Madison Dearborn and Providence Equity, certain other co-investors and certain members of CDW management. Before the IPO, Madison Dearborn and...

  • Page 7
    ...and data storage, video monitors, printers, desktop computers and servers. Our software products include application suites, security, virtualization, operating systems, network management and Software as a Service ("SaaS") offerings. We also provide a full suite of value-added-services, which range...

  • Page 8
    ... distribution centers for picking and shipping as well as configuration and imaging services. We operate two distribution centers in North America: a 450,000 square foot facility in Vernon Hills, Illinois, and a 513,000 square foot facility in North Las Vegas, Nevada. We ship over 37 million units...

  • Page 9
    ... solutions we offer. These wholesale distributors provide logistics management and supply-chain services for us, as well as for our vendor partners. For our North American operations, we purchased approximately 50% of the products we sold as discrete products or as components of a solution directly...

  • Page 10
    ... Federal sales in our Public segment. Our business depends on our vendor partner relationships and the availability of their products. We purchase products for resale from vendor partners, which include OEMs and software publishers, and wholesale distributors. For the year ended December 31, 2015...

  • Page 11
    ... and new hardware, software and services offerings, for example by providing the appropriate training to our account managers, sales technology specialists and engineers to enable them to effectively sell and deliver such new offerings to customers, our business, results of operations or cash...

  • Page 12
    ...and solutions to them; • manage our inventory and accounts receivable; • purchase, sell, ship and invoice our hardware and software products and provide and invoice our services efficiently and on a timely basis; and • maintain our cost-efficient operating model while scaling our business. The...

  • Page 13
    ... entities, educational institutions and healthcare customers, through various contracts and open market sales of products and services. Sales to public sector customers are highly regulated. Noncompliance with contract provisions, government procurement regulations or other applicable laws or...

  • Page 14
    ... data centers or at any of our major sales offices could negatively impact our business, results of operations or cash flows. We are heavily dependent on commercial delivery services. We generally ship hardware products to our customers by FedEx, United Parcel Service and other commercial delivery...

  • Page 15
    ... availability of price protection, purchase discounts and incentive programs from our vendor partners; changes in product, order size and customer mix; the risk of some items in our inventory becoming obsolete; increases in delivery costs that we cannot pass on to customers; and general market and...

  • Page 16
    ...OID as of the filing date of this Annual Report on Form 10-K. However, we cannot assure you that this will continue to be true in the future. Risks Related to Our Indebtedness We have a substantial amount of indebtedness, which could have important consequences to our business. We have a substantial...

  • Page 17
    ... can consist of federal government accounts receivable) plus the lesser of (i) 75% of CDW LLC and its subsidiary guarantors' eligible inventory (valued at cost and net of inventory reserves) and (ii) the product of 85% multiplied by the net orderly liquidation value percentage multiplied by eligible...

  • Page 18
    ...of Operations-Liquidity and Capital Resources" included elsewhere in this report. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional debt or equity capital...

  • Page 19
    ...to their respective limited partners, and the recipients of the shares would generally be permitted to sell the shares immediately pursuant to Rule 144 under the Securities Act. A distribution of shares by Madison Dearborn or Providence Equity, and the subsequent sale of shares by the recipients, or...

  • Page 20
    ... Dominguez, who are managing directors of Providence Equity, serve on our Board of Directors. Madison Dearborn, Providence Equity and the entities respectively controlled by them may hold equity interests in entities that directly or indirectly compete with us, and companies in which they currently...

  • Page 21
    ... center in Vernon Hills, Illinois and a 513,000 square foot distribution center in North Las Vegas, Nevada. In addition, we conduct sales, services and administrative activities in various leased locations primarily in the U.S., Canada and United Kingdom, including data centers in Madison...

  • Page 22
    ... Solutions and Services 51 Senior Vice President - International, Chief Legal Officer and Corporate Secretary 52 Senior Vice President - Public and Advanced Technology Sales 46 Senior Vice President - Operations and Chief Information Officer 45 Senior Vice President - Product and Partner Management...

  • Page 23
    ... Solutions and Services and is responsible for our technology specialist teams focusing on servers and storage, unified communications, security, wireless, power and cooling, networking, software licensing and mobility solutions. Through the end of 2015, Mr. Eckrote had responsibility for CDW Canada...

  • Page 24
    ... Officer. Prior to joining CDW in 2008, Ms. Ziegler spent 15 years at Sara Lee Corporation ("Sara Lee"), a global consumer goods company, in a number of executive roles including finance, mergers and acquisitions, strategy and general management positions in both U.S. and international businesses...

  • Page 25
    ... Purchases of Equity Securities Information relating to our purchases of our common stock during the quarter ended December 31, 2015 is as follows: Total Number of Shares Purchased (in millions) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program...

  • Page 26
    ... to three times our revenue or enterprise value); (ii) operates in a business-to-business distribution environment; (iii) members of the technology industry; (iv) similar customers ( i.e. , business, government, healthcare, and education); (v) companies that provide services and/or solutions; and...

  • Page 27
    ... of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the related notes. We have derived the selected financial data presented below as of December 31, 2015 and December 31, 2014 and for the years ended December 31, 2015, 2014 and 2013 from our Consolidated...

  • Page 28
    Table of Contents Years Ended December 31, (dollars and shares in millions, except per share amounts) 2015 (5) 2014 2013 2012 2011 Statement of Operations Data: Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Income from operations Interest expense, net...

  • Page 29
    ... deferred financing costs. Represents our share of net income/loss from our equity investments. Our 35% share of Kelway's net loss includes our 35% share of an expense related to certain equity awards granted by one of the sellers to Kelway coworkers in July 2015 prior to the acquisition. Primarily...

  • Page 30
    ...secondary-offering-related expenses and expenses related to the consolidation of office locations north of Chicago. During the year ended December 31, 2013, we recorded IPO- and secondaryoffering related expenses of $75.0 million. For additional information on the IPO- and secondary-offering related...

  • Page 31
    ... and advanced service delivery engineers. We are a leading sales channel partner in North America and the United Kingdom for many original equipment manufacturers ("OEMs") and software publishers (collectively, our "vendor partners"), whose products we sell or include in the solutions we offer. We...

  • Page 32
    ... cycle (defined to be days of sales outstanding in Accounts receivable plus days of supply in Inventory minus days of purchases outstanding in Accounts payable, based on a rolling three-month average), debt levels including available credit and leverage ratios, sales per coworker, and coworker...

  • Page 33
    ... conversion cycle is defined as days of sales outstanding in accounts receivable plus days of supply in inventory minus days of purchases outstanding in accounts payable, based on a rolling three-month average. (2) Results of Operations Year Ended December 31, 2015 Compared to Year Ended December...

  • Page 34
    ... to the federal government was driven by growth in sales of netcomm products, software and enterprise storage, as we continued to benefit from strategic changes made to better align with new federal government purchasing programs implemented last year. A continued focus on public safety drove the...

  • Page 35
    ... partner funding includes purchase discounts, volume rebates and cooperative advertising. Gross profit margin may fluctuate based on various factors, including vendor incentive and inventory price protection programs, cooperative advertising funds classified as a reduction of cost of sales, product...

  • Page 36
    ...and volume rebates and cooperative advertising from vendors. Includes the financial results for our other operating segments, CDW Advanced Services, Canada and five months for Kelway, which do not meet the reportable segment quantitative thresholds. Includes certain Headquarters' function costs that...

  • Page 37
    ... Organic net sales growth and Organic net sales growth on a constant currency basis for the years ended December 31, 2015 and 2014 below. Non-GAAP net income excludes, among other things, charges related to the amortization of acquisition-related intangible assets, non-cash equity-based compensation...

  • Page 38
    ... relationships, customer contracts and trade names. Represents our 35% share of an expense related to certain equity awards granted by one of the sellers to Kelway coworkers in July 2015 prior to our acquisition of Kelway. Primarily includes expenses related to the acquisition of Kelway. Represents...

  • Page 39
    ... matters, secondary-offering-related expenses and expenses related to the consolidation of office locations north of Chicago. Includes the impact of consolidating five months for the year ended December 31, 2015 of Kelway's financial results. Organic net sales growth and organic net sales growth on...

  • Page 40
    ... for digital testing requirements, and the addition of more than 140 customer-facing coworkers, the majority in pre- and post-sale technical positions such as technical specialists and service delivery roles. Growth in solutions-focused products, including netcomm and software, also contributed...

  • Page 41
    ... purchase discounts, volume rebates and cooperative advertising. Gross profit margin may fluctuate based on various factors, including vendor incentive and inventory price protection programs, cooperative advertising funds classified as a reduction of cost of sales, product mix, net service contract...

  • Page 42
    ... as a percentage of net sales, which was driven by the absence of costs related to our IPO in 2013, and was partially offset by a decrease in gross profit margin. Public segment income from operations was $313.2 million in 2014, an increase of $66.7 million, or 27.1%, compared to $246.5 million in...

  • Page 43
    ... the redemption price and the net carrying amount of the purchased debt, adjusted for a portion of the unamortized deferred financing costs and/or unamortized premium. (2) (3) We entered into the Revolving Loan, a new $1,250 million five-year senior secured asset-based revolving credit facility...

  • Page 44
    ...$75.0 million of IPO and secondary-offering related expenses in 2014 and 2013, respectively. Based on a normalized effective tax rate of 39.0%. Adjusted EBITDA Adjusted EBITDA was $907.0 million for the year ended December 31, 2014, an increase of $98.5 million, or 12.2%, compared to $808.5 million...

  • Page 45
    ... the year, sales in our Corporate segment, which primarily serves private sector business customers, are typically higher in the fourth quarter than in other quarters due to customers spending their remaining technology budget dollars at the end of the year. Additionally, sales in our Public segment...

  • Page 46
    ... agreements governing our indebtedness. Cash Flows Cash flows from operating, investing and financing activities are as follows: Years Ended December 31, (in millions) 2015 2014 2013 Net cash provided by (used in): Operating activities Investing activities Net change in accounts payable - inventory...

  • Page 47
    ... on-hand as of December 31, 2015 to support the growth in the business. The increase in cash flows was primarily due to the timing of inventory purchases, longer payment terms with certain vendors and growth in the business. Years Ended December 31, (3) (4) (5) (in millions) 2014 2013 Dollar...

  • Page 48
    ...third-party service provider is recorded as a reduction to net sales. In addition to the impact of these services on DPO, DPO also increased due to the mix of payables with certain vendors that have longer payment terms. The cash conversion cycle decreased to 21 days at December 31, 2014 compared to...

  • Page 49
    Table of Contents ended December 31, 2015 and 2014, respectively. The increase in cash provided by accounts payable-inventory financing was primarily due to a new vendor added to our previously existing inventory financing agreement. For a description of the inventory financing transactions ...

  • Page 50
    ... is persuasive evidence of an arrangement for sale, delivery has occurred and/or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Our shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed...

  • Page 51
    ... as data center services such as managed and remote managed services, server co-location, internet connectivity and data backup and storage, is recognized over the period service is provided. We also sell certain products for which we act as an agent. Products in this category include the sale of...

  • Page 52
    ..., industry and market conditions, cost factors, overall financial performance, changes in share price and entity-specific events. December 1, 2015 Impairment Analysis We completed our annual impairment analysis as of December 1, 2015 by utilizing a qualitative assessment for all reporting units. We...

  • Page 53
    ... Value Exceeds Carrying Value Discount Rate Applied to Estimated Future Cash Flows (in millions) Corporate Public Canada CDW Advanced Services Intangible assets 169% 147% 276% 78% 9.0% 9.0% 9.3% 11.5% Intangible assets include customer relationships, trade names, internally developed software...

  • Page 54
    ... market risks relate primarily to changes in interest rates. The interest rates on borrowings under our senior secured asset-based revolving credit facility, our senior secured term loan facility, and the Kelway term loan are floating and, therefore, are subject to fluctuations. In order to manage...

  • Page 55
    ... Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Operations for the years ended December 31, 2015...

  • Page 56
    ... the accompanying consolidated balance sheets of CDW Corporation and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2015. Our...

  • Page 57
    ... CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per-share amounts) December 31, 2015 Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $6.0 and $5.7, respectively Merchandise inventory Miscellaneous...

  • Page 58
    ... of Contents CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) Years Ended December 31, 2015 2014 2013 Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Income from operations Interest expense...

  • Page 59
    Table of Contents CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Years Ended December 31, 2015 2014 2013 Net income Foreign currency translation (net of tax benefits of $0.3 million, $0.5 million and $0 million, respectively) Other comprehensive loss...

  • Page 60
    ... issued for equity-based compensation Excess tax benefits from equity-based compensation Coworker stock purchase plan Common stock issued for acquisition of business Dividends paid Net income Repurchases of common stock Foreign currency translation Balance at December 31, 2015 $ 145.2 - 26...

  • Page 61
    ... long-term debt Payments of debt financing costs Net change in accounts payable-inventory financing Proceeds from issuance of common stock Proceeds from stock option exercises Proceeds from Coworker Stock Purchase Plan Repurchases of common stock Dividends paid Excess tax benefits from equity-based...

  • Page 62

  • Page 63
    ... in North America and the United Kingdom. The Company's offerings range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. Throughout this report, the terms "the Company" and...

  • Page 64
    ... CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company in the allocation. Initial purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Acquisition-related expenses and transaction costs...

  • Page 65
    .... The annual test for impairment is conducted as of December 1. The Company's reporting units used to assess potential goodwill impairment are the same as its operating segments. Under a quantitative assessment, testing for impairment of goodwill is a two-step process. The first step compares the...

  • Page 66
    ... the acquisition cost of the product recorded as cost of sales. These items can be delivered to customers in a variety of ways, including (i) as physical product shipped from the Company's warehouse, (ii) via drop-shipment by the vendor or supplier, or (iii) via electronic delivery for software 64

  • Page 67
    ... as managed and remote managed services, server co-location, internet connectivity and data backup and storage, is recognized over the period service is provided. The Company also sells certain products for which it acts as an agent. Products in this category include the sale of third-party services...

  • Page 68
    ...to be taken in a tax return and recognizes interest and penalties, if any, related to its unrecognized tax benefits in income tax expense. 2. Recent Accounting Pronouncements Balance Sheet Classification of Deferred Taxes In November 2015, the Financial Accounting Standards Board (the "FASB") issued...

  • Page 69
    ... application to all prior periods. The Company elected to early adopt ASU 2015-03 in the second quarter of 2015. As of June 30, 2015, the Company classified deferred financing costs as a direct deduction from the carrying value of the long-term debt liability on the Consolidated Balance Sheets...

  • Page 70
    ... previously held equity investment was determined by management with the assistance of a third party valuation firm, based on information available at the acquisition date. (2) Transaction-related costs associated with this acquisition of $5.8 million during the year ended December 31, 2015 were...

  • Page 71
    ... Services and Canada in an all other category ("Other"). The full amount of goodwill recognized is not deductible for income tax purposes in the United Kingdom. For the year ended December 31, 2015 , net sales and net income of Kelway included in the Company's Consolidated Statements of Operations...

  • Page 72
    ...sellers to Kelway coworkers in July 2015 prior to the completion of the acquisition. Includes additional non-cash equity-based compensation related to equity awards granted to Kelway coworkers after the completion of the acquisition. Includes the elimination of inter-company sales transactions prior...

  • Page 73
    ... comprised of CDW Advanced Services, Canada and Kelway reporting units. For further information regarding the addition to goodwill resulting from the Company's acquisition of Kelway, see Note 3 (Acquisition) . December 1, 2015 Impairment Analysis The Company completed its annual impairment analysis...

  • Page 74
    ... intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions, as described below. These amounts are classified separately as Accounts payable-inventory financing on the accompanying Consolidated Balance Sheets. The Company does not incur any...

  • Page 75
    ... by the inventory purchased under these financing agreements and a second lien on the related accounts receivable. 7. Lease Commitments The Company is obligated under various non-cancelable operating lease agreements for office facilities that generally provide for minimum rent payments and...

  • Page 76
    ... costs of $4.4 million . (2) As of December 31, 2015 , the Company remained in compliance with the covenants under its various credit agreements. Under the credit agreement governing the Senior Secured Term Loan Facility, there are restrictions on the ability of CDW to pay dividends, make share...

  • Page 77
    ...of open orders. At December 31, 2015 , the financial intermediary reported an outstanding balance of $415.6 million under the Revolving Loan inventory financing agreement. The amount included on the Consolidated Balance Sheet as of December 31, 2015 as Accounts payable-inventory financing related to...

  • Page 78
    ... due 2017. The discounts are reported on the Consolidated Balance Sheet as a reduction to the face amount of the Term Loan and are being amortized to interest expense over the term of the related debt. Fees of $6.1 million related to the Term Loan were capitalized as deferred financing costs and are...

  • Page 79
    ...the fair value measurements. The counterparty credit spreads are based on publicly available credit information obtained from a third party credit data provider. 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...

  • Page 80
    ...annum, payable semi-annually on February 15 and August 15 of each year. The first interest payment date was February 15, 2015. CDW LLC and CDW Finance Corporation are the co-issuers of the 2022 Senior Notes and the obligations under the notes are guaranteed by Parent and each of CDW LLC's direct and...

  • Page 81
    ... quotes for identical assets or liabilities in markets that are not considered active. Consequently, the Company's long-term debt is classified as Level 2 within the fair value hierarchy. The fair value of the Kelway Term Loan was estimated using a discounted cash flow analysis based on current...

  • Page 82
    Table of Contents CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Components of Income tax expense (benefit) consist of the following: Years Ended December 31, (in millions) 2015 2014 2013 Current: Federal State Foreign Total current Deferred: Domestic Foreign Total ...

  • Page 83
    ... of the Kelway (U.K.) acquisition, the Company has provided U.S. income taxes on the excess of the financial reporting value of the investment over the corresponding tax basis of $30.4 million . As the Company is indefinitely reinvested in its U.K. business, it will not provide for any additional...

  • Page 84
    ...to the Company after deducting underwriting discounts, expenses and transaction costs. The following pre-tax IPO-related expenses and secondary-offering-related expenses were included within Selling and administrative expenses in the Consolidated Statements of Operations for the years ended December...

  • Page 85
    ... 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 under "Pre-IPO Equity Awards." As of December 31, 2015 , 5,636,925 shares were available for issuance under the 2013 LTIP which was...

  • Page 86
    ... to receive unrestricted shares of the Company's stock at the time of vesting. RSUs generally cliff-vest at the end of four years. RSU activity for the year ended December 31, 2015 is as follows: Number of Units Weighted-Average Grant-Date Fair Value Nonvested at January 1, 2015 Granted (1) Vested...

  • Page 87
    ... Holdings LLC 2007 Incentive Equity Plan (the "Plan") for coworkers, managers, consultants and advisors of the Company and its subsidiaries. The Plan permitted a committee designated by the Board of Managers of CDW Holdings (the "Committee") to grant or sell to any participant Class A Common Units...

  • Page 88
    ... with the Madison Dearborn and Providence Equity 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...

  • Page 89
    ..., the first offering period under the Company's Coworker Stock Purchase Plan (the "CSPP") commenced. The CSPP provides the opportunity for eligible coworkers to acquire shares of the Company's common stock at a 5% discount from the closing market price on the final day of the offering period. There...

  • Page 90
    ... partners, group purchasing organizations and customers, including government agencies, relating to purchases and sales under various contracts. In addition, the Company is subject to indemnification claims under various contracts. From time to time, certain customers of the Company file voluntary...

  • Page 91
    ...two reportable segments: Corporate, which is comprised primarily of private sector business customers, and Public, which is comprised of government agencies and education and healthcare institutions. The Company also has three other operating segments: CDW Advanced Services; Canada; and Kelway, each...

  • Page 92
    ... Net Sales Year Ended December 31, 2014 Dollars in Millions Percentage of Total Net Sales Year Ended December 31, 2013 Dollars in Millions Percentage of Total Net Sales Notebooks/Mobile Devices Netcomm Products Enterprise and Data Storage (Including Drives) Other Hardware Software Services Other...

  • Page 93
    ...by Parent, and each of the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries are, directly or indirectly, 100% owned by CDW LLC. The following tables set forth condensed Consolidating Balance Sheets as of December 31, 2015 and 2014 , Consolidating Statements of Operations for the years ended...

  • Page 94
    ... Balance Sheet December 31, 2015 (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Co-Issuer Consolidating Adjustments Consolidated Assets Current assets: Cash and cash equivalents Accounts receivable, net Merchandise inventory Miscellaneous...

  • Page 95
    ... assets, net Other assets Investment in and advances to subsidiaries Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable-trade Accounts payable-inventory financing Current maturities of long-term debt Deferred revenue Accrued expenses Total current liabilities...

  • Page 96
    ... Adjustments Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense Income (loss) from operations Interest (expense) income, net Net loss on extinguishments of long-term debt Management fee Gain on remeasurement of equity investment Other income...

  • Page 97
    ... Co-Issuer Consolidating Adjustments Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense (Loss) income from operations Interest (expense) income, net Net loss on extinguishments of long-term debt Management fee Other (expense) income, net (Loss...

  • Page 98
    ... Co-Issuer Consolidating Adjustments Consolidated Net sales Cost of sales Gross profit Selling and administrative expenses Advertising expense (Loss) income from operations Interest (expense) income, net Net loss on extinguishments of long-term debt Management fee Other income (expense), net (Loss...

  • Page 99
    Table of Contents CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2015 (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Co-Issuer ...

  • Page 100
    Table of Contents CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2014 (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Non-Guarantor Subsidiary Co-Issuer ...

  • Page 101
    Table of Contents CDW CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2013 (in millions) Parent Guarantor Subsidiary Issuer Guarantor Subsidiaries Non-Guarantor Subsidiary Co-Issuer ...

  • Page 102
    ... debt financing costs Net change in accounts payableinventory financing Proceeds from stock option exercises Proceeds from Coworker stock purchase plan Repurchases of common stock Dividends paid Excess tax benefits from equity-based compensation Advances to/from affiliates Net cash provided by (used...

  • Page 103
    ...costs Net change in accounts payableinventory financing Proceeds from stock option exercises Proceeds from Coworker stock purchase plan Dividends paid Excess tax benefits from equity-based compensation Advances to/from affiliates Net cash provided by (used in) financing activities Effect of exchange...

  • Page 104
    ... costs Net change in accounts payableinventory financing Payment of incentive compensation plan withholding taxes Proceeds from issuance of common stock Dividends paid Advances to/from affiliates Other financing activities Net cash provided by (used in) financing activities Effect of exchange...

  • Page 105
    ...unaudited) Year Ended December 31, 2015 (in millions, except per-share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Net Sales Detail: Corporate: Medium/Large Small Business Total Corporate Public: Government Education Healthcare Total Public Other Net sales Gross profit Income...

  • Page 106
    ... annual basic and diluted net income per share. (1) 19. Subsequent Events On February 9, 2016, the Company announced that its Board of Directors has declared a quarterly cash dividend of $0.1075 per common share to be paid on March 10, 2015 to all stockholders of record as of the close of business...

  • Page 107
    ... to Costs and Expenses Balance at End of Period (in millions) Deductions Allowance for doubtful accounts: Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013 Reserve for sales returns: Year Ended December 31, 2015 Year Ended December 31, 2014 Year Ended December...

  • Page 108
    Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 106

  • Page 109
    ... and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial...

  • Page 110
    ... Company Accounting Oversight Board (United States), the consolidated balance sheets of CDW Corporation and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years...

  • Page 111
    Table of Contents Item 9B. Other Information None. 109

  • Page 112
    ... definitive proxy statement for our 2016 annual meeting of stockholders on May 19, 2016 (" 2016 Proxy Statement"), which we will file with the SEC on or before 120 days after our 2015 fiscal year-end. Item 11. Executive Compensation Information required under this Item 11 is incorporated herein by...

  • Page 113
    ... Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of Comprehensive Income for the years ended December 31, 2015...

  • Page 114
    ...by the undersigned, thereunto duly authorized. CDW CORPORATION Date: February 24, 2016 By: /s/ Thomas E. Richards Thomas E. Richards Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 115
    ...E. Ziegler Ann E. Ziegler ...Chief Executive Officer (principal executive officer) and Director Senior Vice President and Chief Financial Officer (principal financial officer) Vice President and Controller (principal accounting officer) Director February 24, 2016 February 24, 2016 February 24, 2016...

  • Page 116
    ... Company Agreement of CDW Direct, LLC, previously filed as Exhibit 3.10 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg. No. 333-169258) and incorporated herein by reference. Articles of Organization of CDW Government LLC, previously filed as Exhibit 3.11 with CDW Corporation's Form...

  • Page 117
    ... incorporated herein by reference. Management Services Agreement, dated as of October 12, 2007, by and between CDW Corporation, Madison Dearborn Partners V-B, L.P. and Providence Equity Partners L.L.C., previously filed as Exhibit 10.9 with CDW Corporation's Form S-4 filed on September 7, 2010 (Reg...

  • Page 118
    ... party thereto, previously filed as Exhibit 10.33 with CDW Corporation's Amendment No. 2 to Form S-1 filed on June 14, 2013 (Reg. No. 333-187472) and incorporated herein by reference. Share Repurchase Agreement, dated as of May 17, 2015, by and among the Company, Madison Dearborn Capital Partners...

  • Page 119
    ... by reference. Form of Performance Share Award Agreement (executive officers) under the CDW Corporation 2013 Long-Term Incentive Plan, previously filed as Exhibit 10.31 with CDW Corporation's Form 10-K filed on February 26, 2015 and incorporated herein by reference. Form of Non-Employee Director...

  • Page 120
    ... Number Description 32.2** 101.INS* 101.SCH* 101.CAL* 101.DEF* 101.LAB* 101.PRE* Certification of Chief Financial Officer pursuant...Filed herewith ** These items are furnished and not filed. § A management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item...

  • Page 121
    ... company: CDW Technologies LLC The limited liability company is organized under Ch. 183 of the Wisconsin Statutes. Article 2. Article 3. Name of the initial registered agent: Corporation Service Company Street address of the initial registered office: 8040 Excelsior Drive, Suite 400, Madison...

  • Page 122
    ... OPERATING AGREEMENT (this " Agreement ") of CDW Technologies LLC, a Wisconsin limited liability company (the " Company "), is dated and effective as of the 31 st day of December, 2015, by and between the Company and CDW LLC, an Illinois limited liability company, as the sole member of the Company...

  • Page 123
    1.7 Term . Subject to the provisions of Article VII below, the Company shall have perpetual existence. ARTICLE II The Member 2.1 Name The Member . The name and address of the Member is as follows: Address 200 North Milwaukee Avenue Vernon Hills, IL 60061 CDW LLC 2.2 Actions by the Member; ...

  • Page 124
    ...(a) The capital structure of the Company shall consist of one class of common units (the " Common Units "). All Common Units shall be identical with each other in every respect. The Common Units are the Member's share of the Company's profits, losses and distributions pursuant to this Agreement and...

  • Page 125
    ... CDW Holdings LLC and certain of its members, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms (the " Unitholders Agreement "), or any other agreement between the Company or any Subsidiary and such officer of the Company or such Manager...

  • Page 126
    ... of Employees and Agents . The Company may indemnify and advance expenses to any Person, as determined by the Member, by reason of the fact that such Person was an employee or agent of the Company or is or was serving at the request of the Company as a manager, director, officer, partner, venturer...

  • Page 127
    ... at the request of the Company as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other...

  • Page 128
    9.6 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the instrument. [Signature page follows] 7

  • Page 129
    IN WITNESS WHEREOF, the undersigned has duly executed this Operating Agreement as of the day first above written. CDW LLC By: /s/ Robert J. Welyki _____ Name: Robert J. Welyki Its:Vice President, Treasurer and Assistant Secretary CDW TECHNOLOGIES LLC By: /s/ Robert J. Welyki _____ Name: Robert J. ...

  • Page 130
    SCHEDULE A Name of Member CDW LLC Number of Common Units 1 9

  • Page 131
    CDW CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (unaudited) EXHIBIT 12.1 Years Ended December 31, (dollars in millions) 2011 2012 2013 2014 2015 Computation of earnings: Income before income taxes and adjustment for (income) loss from equity investees Distributed income from ...

  • Page 132
    ... CDW Government LLC CDW Logistics, Inc. CDW Canada Corp. CDW NA Limited CDW International Holdings Limited Kelway Bidco Limited Kelway Holdings Limited Kelway Limited Kelway Topco Limited Jurisdiction of Organization Illinois Delaware Wisconsin Illinois Illinois Illinois Novia Scotia United Kingdom...

  • Page 133
    ... of CDW Corporation and subsidiaries and the effectiveness of internal control over financial reporting of CDW Corporation and subsidiaries included in this Annual Report (Form 10-K) of CDW Corporation for the year ended December 31, 2015. /s/ Ernst & Young LLP Chicago, Illinois February 24, 2016

  • Page 134
    ... and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Thomas E. Richards Thomas E. Richards Chairman, President and Chief Executive Officer CDW Corporation February 24, 2016

  • Page 135
    ...; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Ann E. Ziegler Ann E. Ziegler Senior Vice President and Chief Financial Officer CDW Corporation February 24, 2016

  • Page 136
    ...THE UNITED STATES CODE I, Thomas E. Richards, the chief executive officer of CDW Corporation ("CDW"), certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2015 (the "10-K") of CDW fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act...

  • Page 137
    ... OF THE UNITED STATES CODE I, Ann E. Ziegler, the chief financial officer of CDW Corporation ("CDW"), certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2015 (the "10-K") of CDW fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act...