CDW Corp Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated July 24, 2013, discloses preliminary financial results for the second quarter ended June 30, 2013, and details a proposed debt refinancing strategy. The filing is made under Items 2.02 and 7.01 to provide information to prospective lenders regarding CDW's financial condition.
Key Financial Metrics
- Revenue: Preliminary total net sales for Q2 2013 increased approximately 7.5% compared to Q2 2012.
- Profitability: Adjusted EBITDA margin for Q2 2013 was approximately 7.6%, down from 7.8% in Q2 2012.
- Debt and Liquidity: As of June 30, 2013, total debt net of cash and cash equivalents was approximately $3.5 billion.
- Credit Facilities: The $900.0 million ABL Facility had no outstanding borrowings as of June 30, 2013, with $1.2 million in undrawn letters of credit and $267.4 million reserved under the floorplan sub-facility.
- Outstanding Notes: $571.5 million aggregate principal of Senior Subordinated Notes was outstanding as of June 30, 2013.
Material Changes and Debt Restructuring
CDW is pursuing a refinancing to redeem junior indebtedness and lower costs. The plan includes an incremental $190.0 million senior secured term loan. Proceeds from this loan, combined with net proceeds from the recent IPO, will be used to redeem Senior Subordinated Notes due 2017.
- Recent Redemption: On July 2, 2013, CDW redeemed $175.0 million of 8.0% senior secured notes due 2018 using IPO proceeds.
- Upcoming Redemption: On August 1, 2013, CDW will redeem $324.0 million of Senior Subordinated Notes at 106.268% of principal plus accrued interest.
- Financial Impact: The August 1 redemption is expected to result in a pre-tax loss on extinguishment of long-term debt of $24.7 million in Q3 2013, comprising the redemption premium and write-off of unamortized deferred financing costs.
Outlook, Risks, and Unusual Items
The proposed refinancing is subject to market conditions and may not occur as described. The financial results presented are unaudited, preliminary, and subject to finalization. Management cautions investors not to draw inferences regarding future performance or data not provided. Adjusted EBITDA is a non-GAAP measure; a reconciliation to net income is available in the Form 10-Q for the quarter ended March 31, 2013.
Investor Verification Checklist
- Verify the finalization of Q2 2013 financial results against the preliminary figures provided.
- Confirm the successful closing of the proposed $190.0 million senior secured term loan.
- Monitor the execution of the August 1, 2013, redemption of $324.0 million in Senior Subordinated Notes.
- Review the actual Q3 2013 financial statements for the recognized $24.7 million pre-tax loss on debt extinguishment.
- Check the final reconciliation of net income to Adjusted EBITDA for Q2 2013 in the upcoming Form 10-Q.