CDW Corp Form 8-K Summary
Business Context and Reporting Period
CDW Corporation (CDW) filed this Current Report on Form 8-K on April 16, 2013, to disclose preliminary financial results for the first quarter ended March 31, 2013, and to announce a proposed debt refinancing. The filing is made pursuant to Regulation FD to ensure fair disclosure to prospective lenders.
Key Financial Metrics
- Net Sales: Estimated to have increased approximately 4% compared to the first quarter of 2012. On an average daily basis, sales increased approximately 5.6% due to one fewer selling day in the current quarter.
- Adjusted EBITDA Margin: Estimated at 7.4% for the first quarter of 2013, compared to 7.2% in the prior year period.
- Debt and Liquidity: As of March 31, 2013, total debt net of cash and cash equivalents was approximately $3.534 billion.
- Existing Term Loan Facility: Outstanding principal was $1,299.5 million ($408.7 million maturing in 2014; $890.8 million maturing in 2017).
- ABL Facility: No outstanding borrowings. $1.7 million in undrawn letters of credit and $249.7 million reserved under the floorplan sub-facility.
- Senior Subordinated Notes: $50.0 million redeemed on March 8, 2013, resulting in a pre-tax loss on extinguishment of $3.9 million.
Material Changes and Debt Activity
CDW is pursuing a refinancing of its existing senior secured term loan facility with the objective of extending maturities, lowering debt costs, and amending covenants. The proposed transaction involves a new $1.35 billion senior secured term loan facility. Additionally, the company made an optional prepayment of $40.0 million on its Existing Term Loan Facility on January 30, 2013, to satisfy excess cash flow provisions.
Outlook, Risks, and Unusual Items
The proposed refinancing is subject to market conditions and may not occur as described or at all. The financial results disclosed are preliminary, unaudited, and subject to finalization. Management cautions investors not to draw inferences regarding future performance from this preliminary data. The $3.9 million loss on debt extinguishment is an unusual item impacting the first quarter's pre-tax results.
Investor Verification Checklist
- Verify the finalization of Q1 2013 financial results against the preliminary estimates provided.
- Confirm the execution and final terms of the proposed $1.35 billion refinancing.
- Review the reconciliation of net income to Adjusted EBITDA in the upcoming 10-Q filing.
- Monitor the impact of the $3.9 million debt extinguishment loss on net income.