CDW 2015 Annual Report Download - page 37

(2) We entered into the Revolving Loan, a new $1,250 million five-year senior secured asset-based revolving credit facility. The Revolving Loan replaced our previous
revolving loan credit facility that was to mature on June 24, 2016. The loss recognized represents the write-off of a portion of unamortized deferred financing costs.
Gainonremeasurementofequityinvestment
On August 1, 2015, we completed the acquisition of Kelway by purchasing the remaining 65% of its outstanding common stock which increased our ownership
interest from 35% to 100%, and provided us control. As a result, our previously held 35% equity investment was remeasured to fair value, resulting in a gain of $98.1 million
recorded in Gain on remeasurement of equity investment in the Consolidated Statements of Operations.
Incometaxexpense
Income tax expense was $243.9 million in 2015 , compared to $142.8 million in 2014 . The effective income tax rate, expressed by calculating income tax expense
or benefit as a percentage of income before income taxes, was 37.7% and 36.8% for 2015 and 2014 , respectively.
For 2015 , the effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes and withholding tax expense on the earnings of our
Canadian business as a result of no longer asserting permanent reinvestment which was partially offset by a deferred tax benefit as a result of a tax rate reduction in the U.K.
For 2014 , the effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, including current year state income tax credits. The higher
effective tax rate for 2015 as compared to 2014 was primarily attributable to higher state income taxes due to lower state income tax credits and the aforementioned Canadian
withholding tax expense partially offset by the deferred tax benefit reflecting the tax rate reduction in the U.K. We are asserting that the unremitted earnings of our U.K.
business are indefinitely reinvested.
Non-GAAPFinancialMeasureReconciliations
We have included reconciliations of Non-GAAP net income, EBITDA, Adjusted EBITDA, 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, acquisition and integration expenses and gains and losses from the extinguishment of long-term
debt. 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. Organic net sales growth is calculated as net sales growth
excluding the impact of acquisitions recorded within the last twelve months. Organic net sales growth on a constant currency basis is calculated as organic net sales growth
excluding the impact of foreign currency translation on organic net sales compared to the prior period. Non-GAAP net income, EBITDA, Adjusted EBITDA, Organic net
sales growth and Organic net sales growth on a constant currency basis 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 us may differ from similar measures used by other
companies, even when similar terms are used to identify such measures.
We believe that Non-GAAP net income, EBITDA, Adjusted EBITDA, Organic net sales growth and Organic net sales growth on a constant currency basis 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 is also the primary measure used in certain key covenants and definitions contained in the credit agreement governing our Term Loan,
including the excess cash flow payment provision, the restricted payment covenant and the net leverage ratio. These covenants and definitions are material components of the
Term Loan as they are used in determining the interest rate applicable to the Term Loan, our ability to make certain investments, incur additional debt and make restricted
payments, such as dividends and share repurchases, as well as whether we are required to make additional principal prepayments on the Term Loan beyond the quarterly
amortization payments. For further details regarding the Term Loan, see Note 8 (Long-Term Debt) to the accompanying Consolidated Financial Statements.
Non-GAAPnetincome
Non-GAAP net income was $503.5 million for the year ended December 31, 2015 , an increase of $93.6 million , or 22.8% , compared to $409.9 million for the
year ended December 31, 2014 .
36