CDW Corporation. Non-GAAP Reconciliations First Quarter CDW.com

Transcription

1 CDW Corporation Non-GAAP Reconciliations First Quarter 2016 CDW.com

2 Q Adjusted EBITDA Reconciliation to Net Income Three Months Ended March 31, Net income $ 77.8 $ 54.7 Depreciation and amortization Income tax expense Interest expense, net EBITDA* Adjustments: Non-cash equity-based compensation Net loss on extinguishment of long-term debt 24.3 Income from equity investment (0.6) (4.5) Acquisition and integration expenses (i) Other adjustments (ii) (2.7) 1.7 Total adjustments Adjusted EBITDA (iii) * $ $ (i) (ii) Comprises expenses related to CDW UK. Primarily includes the favorable resolution of a local sales tax matter, partially offset by expenses related to the consolidation of office locations north of Chicago and historical retention costs. (iii) Includes the impact of consolidating three months for the quarter-ended March 31, 2016 of CDW UK's financial results. * EBITDA and Adjusted EBITDA are non-gaap financial measures. See Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2016, for a discussion of non-gaap financial measures. 2

3 Q Non-GAAP Net Income Reconciliation Three Months Ended March 31, Net income $ 77.8 $ 54.7 Amortization of intangibles (i) Non-cash equity-based compensation Net loss on extinguishments of long-term debt 24.3 Acquisition and integration expenses (ii) Other adjustments (iii) (3.1) 0.6 Aggregate adjustment for income taxes (iv) (19.5) (27.3) Non-GAAP net income (v) $ $ 97.6 (i) (ii) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. Comprises expenses related to CDW UK. (iii) Primarily includes the favorable resolution of a local sales tax matter, partially offset by expenses related to the consolidation of office locations north of Chicago. (iv) (v) Based on a normalized effective tax rate of 36.0% and 39.0%, respectively. The decrease in the rate is primarily due to including the incremental impact of CDW UK and differing statutory tax rates in the US and the UK. Includes the impact of consolidating three months for the quarter ended March 31, 2016 of CDW UK's financial results. * Non-GAAP net income is a non-gaap financial measure. See Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2016, for a discussion of non-gaap financial measures. 3

4 Q Non-GAAP Net Income Per Share ($ and shares in millions, except per share amounts) Three Months Ended March 31, Net income $ 77.8 $ 54.7 Weighted-average common shares outstanding - Diluted Net income per diluted share $ 0.46 $ 0.32 Non-GAAP net income* $ $ 97.6 Non-GAAP weighted-average common shares outstanding - Diluted Non-GAAP net income per diluted share* $ 0.67 $ 0.56 * Non-GAAP net income and Non-GAAP net income per diluted share are non-gaap financial measures. See Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2016, for a discussion of non-gaap financial measures. 4

5 Adjusted EBITDA Reconciliation to Net Income and Adjusted EBITDA Margin Calculation LTM Q1' (vii) LTM Q1'16 (vii) Net income (loss) $ (29.2) $ 17.1 $ $ $ $ $ Depreciation and amortization Income tax expense (benefit) (7.8) Interest expense, net EBITDA $ $ $ $ $ $ 1,033.9 $ 1,075.6 Adjustments: Non-cash equity-based compensation Sponsor Fee Consulting and debt-related professional fees Net loss (gain) on extinguishments of long-term debt (2.0) (Income) loss from equity investment (i) (0.1) (0.1) (0.3) (0.6) (2.2) IPO and secondary-offering related expenses (ii) Litigation, net (iii) 4.3 (4.1) (0.9) (1.5) (1.5) Acquisition and integration expenses (iv) Gain on remeasurement of equity investment (v) (98.1) (98.1) Other adjustments (vi) Adjusted EBITDA $ $ $ $ $ $ 1,018.5 $ 1,040.4 Net Sales $ 8,801.2 $ 9,602.4 $ 10,128.2 $ 10,768.6 $ 12,074.5 $ 12,988.7 $ 13,350.2 Adjusted EBITDA Margin (vii) 6.8 % 7.5 % 7.6 % 7.5 % 7.5 % 7.8 % 7.8 % (i) Represents the Company's share of net (income) loss from the Company's equity investments includes the Company's 35% share of CDW UK's (previously known as Kelway) net loss which includes the Company's 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the acquisition. (ii) 2013 includes IPO related expenses of $74.3 million, consisting of (1) acceleration charge for certain equity awards and related employer payroll taxes ($40.7 million); (2) RDU Plan cash retention pool accrual ($7.5 million); (3) management services agreement termination fee ($24.4 million); and (4) other expenses ($1.7 million) also includes $0.7 million of secondary-offering related expenses and 2015 include various secondary offerings completed during that time. (iii) Relates to unusual, non-recurring litigation matters. (iv) Comprises expenses related to CDW UK. (v) Represents the gain resulting from the remeasurement of the Company's previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. (vi) Other adjustments primarily include certain historical retention costs, expenses related to the consolidation of office locations north of Chicago and for Q1 2016, the favorable resolution of a local sales tax matter. (vii) Defined as Adjusted EBITDA divided by Net sales. (viii) 2015 and LTM Q1'2016 reflects the impact of consolidating CDW UK's financial results for five months and eight months, respectively. 5

6 Non-GAAP Net Income Reconciliation LTM Q1' (xii) LTM Q1'16 (xii) Net income (loss) $ (29.2) $ 17.1 $ $ $ $ $ Amortization of intangibles (i) Non-cash equity-based compensation Non-cash equity-based compensation related to equity investment (ii) Net loss (gain) on extinguishments of long-term debt (2.0) Interest expense adjustment related to extinguishments of long-term debt (iii) (0.7) (19.4) (3.3) (7.5) (1.1) Debt-related refinancing costs (iv) IPO and secondary-offering related expenses (v) Litigation, net (vi) (6.3) (0.6) Acquisition and integration expenses (vii) Gain on remeasurement of equity investment (viii) (98.1) (98.1) Other adjustments (ix) 2.9 (0.8) Aggregate adjustment for income taxes (x) (xi) (66.3) (106.8) (71.6) (113.5) (103.0) (64.8) (57.0) Non-GAAP net income $ 85.7 $ $ $ $ $ $ (i) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (ii) Represents the Company's 35% share of an expense related to certain equity awards granted by one of the sellers to CDW UK coworkers in July 2015 prior to the Company's acquisition. (iii) Reflects adjustments to interest expense resulting from debt extinguishments. Represents the difference between interest expense previously recognized under the effective interest method and actual interest paid. (iv) Represents fees and costs expensed related to the December 2010 and March 2011 amendments to the Company's prior term loan facility. (v) 2013 includes IPO related expenses of $74.3mm, consisting of (1) acceleration charge for certain equity awards and related employer payroll taxes ($40.7mm); (2) RDU Plan cash retention pool accrual ($7.5mm); (3) management services agreement termination fee ($24.4mm); and (4) other expenses ($1.7mm) also includes $0.7mm of secondary-offering related expenses and 2015 includes various secondary offerings completed during that time. (vi) Relates to unusual, non-recurring litigation matters. (vii) Comprises expenses related to CDW UK. (viii) Represents the gain resulting from the remeasurement of the Company's previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK. (ix) Other adjustments primarily includes expenses related to the favorable resolution of a local sales tax matter and consolidation of office locations north of Chicago. (x) Based on a normalized effective tax rate of 39.0% prior to the CDW UK acquisition in Q After the CDW UK acquisition and through Q4 2015, the effective tax rate was 38%. Beginning in Q the effective tax rate is 36%. (xi) Note that the non-cash equity-based compensation from our equity investment and the gain resulting from the remeasurement of our previously held 35% equity investment to fair value upon the completion of the acquisition of CDW UK was tax effected at a rate of 35.4% and LTM Q1 16 includes additional tax expense of $3.3 million as a result of recording withholding tax on the unremitted earnings of our Canadian subsidiary. (xii) 2015 and LTM Q1'2016 reflects the impact of consolidating CDW UK's financial results for five months and eight months, respectively. 6

7 Return on Invested Capital Calculation 2010 LTM Q1' (v) LTM Q1'16 (v) Numerator Income from operations $ $ $ $ $ $ $ Amortization of intangibles (i) Debt-related refinancing costs (ii) Non-cash equity-based compensation Other one-time items as incurred (iii) Adjusted NOPBT Taxes (iv) (209.3 ) (257.3 ) (271.6 ) (291.4 ) (332.0 ) (365.7 ) (367.6 ) Adjusted NOPAT $ $ $ $ $ $ $ Denominator Trailing 5-point avg. AR (incl. misc. rec.) $ 1,210.7 $ 1,352.5 $ 1,400.1 $ 1,502.0 $ 1,629.6 $ 1,841.9 $ 1,858.1 Trailing 5-point avg. Inventory Trailing 5-point avg. AP (500.4 ) (712.0 ) (831.2 ) (906.7 ) (1,017.8 ) (1,132.3 ) (1,159.6 ) Trailing 5-point avg. Net P&E Working Capital + Net P&E $ 1,170.9 $ 1,136.4 $ 1,079.2 $ 1,130.5 $ 1,188.9 $ 1,278.0 $ 1,284.9 Return on Invested Capital (ROIC) 28.0 % 35.4 % 39.4 % 40.3 % 43.7 % 44.7 % 44.7 % (i) Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names. (ii) Represents fees and costs expensed related to the December 2010 and March 2011 amendments to the Company's prior term loan facility. (iii) Includes IPO and secondary-offering related expenses, litigation items, acquisition and integration expenses and expenses related to the consolidation of office locations north of Chicago. (iv) Based on a normalized effective tax rate of 39.0%. (v) 2015 and LTM Q1'2016 Return on Invested Capital is calculated on an organic basis, excluding the impact of the acquisition of CDW UK. 7