UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2016~~2017


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35985

CDW CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		26-0273989
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

75 Tri-State International Lincolnshire, Illinois		60069
(Address of principal executive offices)		(Zip Code)

(847) 465-6000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated ~~filer”,~~filer,” “accelerated filer,” ~~and~~ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):



Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

As of July ~~31, 2016,~~28, 2017, there were ~~163,313,999~~154,858,550 shares of common stock, $0.01 par value, outstanding.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of June 30, ~~2016~~2017 and December 31, ~~2015~~2016	3
	Consolidated Statements of Operations for the Three and Six Months ~~Ended~~ended June 30, ~~2016~~2017 and ~~2015~~2016	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, ~~2016~~2017 and ~~2015~~2016	5
	Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, ~~2016~~2017	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2016~~2017 and ~~2015~~2016	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	4847
SIGNATURES		4948
Exhibit Index		5049

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per-share amounts)

June 30,
2016
December 31, 2015
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 129.4
$ 37.6
Accounts receivable, net of allowance for doubtful accounts of $5.9 and $6.0, respectively 2,082.5
2,017.4
Merchandise inventory 487.3
393.1
Miscellaneous receivables 260.3
198.4
Prepaid expenses and other 115.8
144.3
Total current assets 3,075.3
2,790.8
Property and equipment, net 163.8
175.4
Goodwill 2,475.0
2,500.4
Other intangible assets, net 1,162.0
1,276.4
Other assets 11.8
12.3
Total assets $ 6,887.9
$ 6,755.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade $ 1,078.1
$ 866.5
Accounts payable-inventory financing 509.8
439.6
Current maturities of long-term debt 26.1
27.2
Deferred revenue 144.6
151.9
Accrued expenses:
Compensation 135.6
120.4
Interest 25.1
25.1
Sales taxes 26.9
38.1
Advertising 59.1
52.3
Income taxes 19.7
—
Other 152.7
166.2
Total current liabilities 2,177.7
1,887.3
Long-term liabilities:
Debt 3,214.4
3,232.5
Deferred income taxes 420.8
469.6
Other liabilities 61.6
70.0
Total long-term liabilities 3,696.8
3,772.1
Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.01 par value, 100.0 shares authorized, no shares issued or outstanding for both periods —
—
Common stock, $0.01 par value, 1,000.0 shares authorized; 163.2 and 168.2 shares issued and outstanding, respectively 1.6
1.7
Paid-in capital 2,831.1
2,806.9
Accumulated deficit (1,715.3 ) (1,651.6 )
Accumulated other comprehensive loss (104.0 ) (61.1 )
Total stockholders’ equity 1,013.4
1,095.9
Total liabilities and stockholders’ equity $ 6,887.9
$ 6,755.3

~~The accompanying notes are an integral part of the Consolidated Financial Statements.~~

~~Table of Contents~~

CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Net sales $ 3,664.6
$ 3,314.0
$ 6,781.3
$ 6,069.2

Cost of sales 3,054.1
2,779.5
5,646.3
5,078.2

Gross profit 610.5
534.5
1,135.0
991.0

Selling and administrative expenses 344.7
290.6
674.0
566.1

Advertising expense 42.3
38.0
76.5
67.4

Income from operations 223.5
205.9
384.5
357.5

Interest expense, net (36.9 ) (37.8 ) (75.0 ) (82.6 )
Net loss on extinguishments of long-term debt —
—
—
(24.3 )
Other income, net 0.9
4.0
1.9
8.5

Income before income taxes 187.5
172.1
311.4
259.1

Income tax expense (70.0 ) (63.9 ) (116.1 ) (96.2 )
Net income $ 117.5
$ 108.2
$ 195.3
$ 162.9

Net income per common share:
Basic $ 0.71
$ 0.63
$ 1.18
$ 0.95

Diluted $ 0.70
$ 0.63
$ 1.16
$ 0.94

Weighted-average common shares outstanding:
Basic 164.9
171.0
166.1
171.6

Diluted 166.7
172.5
167.8
173.0

Cash dividends declared per common share $ 0.1075
$ 0.0675
$ 0.2150
$ 0.1350

CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per-share amounts)

	June 30, 2017			December 31, 2016
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	79.0		$	263.7
Accounts receivable, net of allowance for doubtful accounts of $6.2 and $5.9, respectively	2,335.3			2,168.6
Merchandise inventory	513.6			452.0
Miscellaneous receivables	337.8			234.9
Prepaid expenses and other	131.0			118.9
Total current assets	3,396.7			3,238.1
Property and equipment, net	160.7			163.7
Goodwill	2,469.3			2,455.0
Other intangible assets, net	976.6			1,055.6
Other assets	38.3			36.0
Total assets	$	7,041.6		$	6,948.4
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	1,391.6		$	1,072.9
Accounts payable-inventory financing	496.4			580.4
Current maturities of long-term debt	18.5			18.5
Deferred revenue	180.9			172.6
Accrued expenses:
Compensation	150.7			167.6
Interest	21.6			25.1
Sales taxes	32.0			38.0
Advertising	89.3			55.8
Income taxes	12.4			—
Other	161.8			149.8
Total current liabilities	2,555.2			2,280.7
Long-term liabilities:
Debt	3,277.8			3,215.9
Deferred income taxes	329.5			369.2
Other liabilities	30.0			37.1
Total long-term liabilities	3,637.3			3,622.2
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 100.0 shares authorized, no shares issued or outstanding for both periods	—			—
Common stock, $0.01 par value, 1,000.0 shares authorized, 155.6 and 160.3 shares issued and outstanding, respectively	1.5			1.6
Paid-in capital	2,890.5			2,857.3
Accumulated deficit	(1,927.1		)	(1,673.8		)
Accumulated other comprehensive loss	(115.8		)	(139.6		)
Total stockholders’ equity	849.1			1,045.5
Total liabilities and stockholders’ equity	$	7,041.6		$	6,948.4

The accompanying notes are an integral part of the Consolidated Financial Statements.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Net income $ 117.5
$ 108.2
$ 195.3
$ 162.9
Foreign currency translation (net of tax benefit of $0.3 and $1.7 million, and of $0.3 and $0.3 million, respectively) (35.0 ) 4.7
(42.9 ) (6.3 )
Other comprehensive (loss) income, net of tax (35.0 ) 4.7
(42.9 ) (6.3 )
Comprehensive income $ 82.5
$ 112.9
$ 152.4
$ 156.6

CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per-share amounts) (unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net sales	$	3,994.4		$	3,664.6		$	7,319.1		$	6,781.3
Cost of sales	3,353.3			3,054.1			6,125.5			5,646.3
Gross profit	641.1			610.5			1,193.6			1,135.0
Selling and administrative expenses	363.5			344.7			710.9			674.0
Advertising expense	46.5			42.3			81.8			76.5
Income from operations	231.1			223.5			400.9			384.5
Interest expense, net	(35.9		)	(36.9		)	(75.6		)	(75.0		)
Net loss on extinguishments of long-term debt	—			—			(57.4		)	—
Other income	0.3			0.9			1.3			1.9
Income before income taxes	195.5			187.5			269.2			311.4
Income tax expense	(54.5		)	(70.0		)	(70.5		)	(116.1		)
Net income	$	141.0		$	117.5		$	198.7		$	195.3

Net income per common share:
Basic	$	0.90		$	0.71		$	1.26		$	1.18
Diluted	$	0.89		$	0.70		$	1.23		$	1.16

Weighted-average common shares outstanding:
Basic	156.0			164.9			157.7			166.1
Diluted	159.0			166.7			160.9			167.8

Cash dividends declared per common share	$	0.1600		$	0.1075		$	0.3200		$	0.2150

The accompanying notes are an integral part of the Consolidated Financial Statements.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
Preferred Stock Common Stock
Shares Amount Shares Amount
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive Loss
Total
Stockholders’ Equity
Balance as of December 31, 2015 —
$ —
168.2
$ 1.7
$ 2,806.9
$ (1,651.6 ) $ (61.1 ) $ 1,095.9
Net income —
—
—
—
—
195.3
—
195.3
Equity-based compensation expense —
—
—
—
14.9
—
—
14.9
Stock option exercises —
—
0.1
—
3.8
—
—
3.8
Excess tax benefits from equity-based compensation —
—
—
—
0.7
—
—
0.7
Coworker Stock Purchase Plan —
—
0.1
—
4.5
—
—
4.5
Common stock issued for equity-based compensation —
—
0.3
—
—
—
—
—
Repurchases of common stock —
—
(5.5 ) (0.1 ) —
(223.0 ) —
(223.1 )
Dividends —
—
—
—
0.3
(36.0 ) —
(35.7 )
Foreign currency translation —
—
—
—
—
—
(42.9 ) (42.9 )
Balance as of June 30, 2016 —
$ —
163.2
$ 1.6
$ 2,831.1
$ (1,715.3 ) $ (104.0 ) $ 1,013.4

CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income	$	141.0		$	117.5		$	198.7		$	195.3
Foreign currency translation, net⁽¹⁾	18.9			(35.0		)	25.4			(42.9		)
Unrealized loss from hedge accounting, net⁽²⁾	(1.2		)	—			(1.6		)	—
Other comprehensive income (loss), net	17.7			(35.0		)	23.8			(42.9		)
Comprehensive income	$	158.7		$	82.5		$	222.5		$	152.4

The accompanying notes are an integral part of the Consolidated Financial Statements.

⁽¹⁾ Net of tax (expense) benefit of $0.1 million and $0.3 million for three months ended June 30, 2017 and 2016, and net of tax (expense) benefit of $0.1 million and $0.3 million for six months ended June 30, 2017 and 2016, respectively.

⁽²⁾Net of tax benefit of $0.8 million and $1.1 million for three and six months ended June 30, 2017.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in millions) (unaudited)

	Preferred Stock			Common Stock
	Shares	Amount		Shares		Amount			Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of December 31, 2016	—	$	—	160.3		$	1.6		$	2,857.3	$	(1,673.8	)	$	(139.6	)	$	1,045.5
Net income	—	—		—		—			—		198.7			—			198.7
Equity-based compensation expense	—	—		—		—			20.7		—			—			20.7
Stock option exercises	—	—		1.3		—			7.4		—			—			7.4
Coworker Stock Purchase Plan	—	—		0.1		—			4.7		—			—			4.7
Repurchases of common stock	—	—		(6.1	)	(0.1		)	—		(359.3		)	—			(359.4		)
Dividends	—	—		—		—			0.4		(50.7		)	—			(50.3		)
Incentive compensation plan shares withheld for taxes	—	—		—		—			—		(42.0		)	—			(42.0		)
Foreign currency translation	—	—		—		—			—		—			25.4			25.4
Unrealized loss from hedge accounting	—	—		—		—			—		—			(1.6		)	(1.6		)
Balance as of June 30, 2017	—	$	—	155.6		$	1.5		$	2,890.5	$	(1,927.1	)	$	(115.8	)	$	849.1

The accompanying notes are an integral part of the Consolidated Financial Statements.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited)	CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited)							CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited)

		Six Months Ended June 30,							Six Months Ended June 30,
		2016			2015				2017			2016
Cash flows from operating activities:
Net income		$	195.3		$	162.9			$	198.7		$	195.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		127.7			105.1				129.5			127.7
Equity-based compensation expense		18.1			12.2				23.6			18.1
Deferred income taxes		(49.9		)	(45.2		)		(40.3		)	(49.9		)
Allowance for doubtful accounts									0.2			—
Amortization of deferred financing costs, debt premium and debt discount, net		3.3			3.1				3.7			3.3
Net loss on extinguishments of long-term debt		—			24.3				57.4			—
Income from equity investment		—			(7.9		)
Gain on interest rate cap agreements									(0.5		)	—
Other		—			2.4				(0.2		)	—
Changes in assets and liabilities:
Accounts receivable		(74.9		)	(157.7		)		(156.3		)	(74.9		)
Merchandise inventory		(99.0		)	(98.9		)		(57.8		)	(99.0		)
Other assets		(44.4		)	(20.1		)		(120.9		)	(44.4		)
Accounts payable-trade		219.3			151.9				311.8			219.3
Other current liabilities		23.5			(34.7		)		34.4			23.5
Long-term liabilities		(5.9		)	1.7				(7.1		)	(5.9		)
Net cash provided by operating activities		313.1			99.1				376.2			313.1
Cash flows from investing activities:
Capital expenditures		(25.7		)	(22.9		)		(36.8		)	(25.7		)
Premium payments on interest rate cap agreements		—			(0.5		)
Net cash used in investing activities		(25.7		)	(23.4		)		(36.8		)	(25.7		)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility		105.4			—
Repayments of borrowings under revolving credit facility		(105.4		)	—
Proceeds from borrowings under revolving credit facilities									67.7			105.4
Repayments of borrowings under revolving credit facilities									(13.7		)	(105.4		)
Repayments of long-term debt		(13.4		)	(7.7		)		(7.5		)	(13.4		)
Proceeds from issuance of long-term debt		—			525.0				2,083.0			—
Payments to extinguish long-term debt		—			(525.3		)		(2,121.3		)	—
Payments of debt financing costs		—			(6.8		)		(9.6		)	—
Net change in accounts payable-inventory financing		71.3			41.2				(85.1		)	71.3
Proceeds from stock option exercises		3.8			1.0				7.4			3.8
Excess tax benefits from equity-based compensation		0.7			0.2
Payment of incentive compensation plan withholding taxes									(42.0		)	0.7
Proceeds from Coworker Stock Purchase Plan		4.5			4.2				4.7			4.5
Repurchases of common stock		(223.1		)	(91.7		)		(359.4		)	(223.1		)
Dividends		(35.7		)	(23.2		)		(50.3		)	(35.7		)
Other		(0.8		)	—
Principal payments under capital lease obligations									(0.6		)	(0.8		)
Net cash used in financing activities		(192.7		)	(83.1		)		(526.7		)	(192.7		)
Effect of exchange rate changes on cash and cash equivalents		(2.9		)	(1.4		)		2.6			(2.9		)
Net increase (decrease) in cash and cash equivalents		91.8			(8.8		)
Net (decrease) increase in cash and cash equivalents									(184.7		)	91.8
Cash and cash equivalents—beginning of period		37.6			344.5				263.7			37.6
Cash and cash equivalents—end of period		$	129.4		$	335.7			$	79.0		$	129.4
Supplementary disclosure of cash flow information:
Cash paid for Interest, net		$	(73.0	)	$	(81.3	)		$	(76.8	)	$	(73.0	)
Cash paid for Income taxes, net		$	(132.7	)	$	(123.4	)		$	(96.5	)	$	(132.7	)

The accompanying notes are an integral part of the Consolidated Financial Statements.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~


1.	Description of Business and Summary of Significant Accounting Policies

Description of Business

CDW Corporation (“Parent”) is a Fortune 500 company with multi-national capabilities and a leading provider of integrated information technology (“IT”) solutions to small, medium and large business, government, education and healthcare customers in the United States, Canada 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 “CDW” refer to Parent and its 100% owned subsidiaries.

Parent has two 100% owned subsidiaries, CDW LLC and CDW Finance Corporation. CDW LLC is an Illinois limited liability company that, together with its 100% owned subsidiaries, holds all material assets and conducts all business activities and operations of the Company. CDW Finance Corporation is a Delaware corporation formed for the sole purpose of acting as co-issuer of certain debt obligations and does not hold any material assets or engage in any business activities or operations.

On August 1, 2015, the Company completed the acquisition of Kelway TopCo Limited (“Kelway”) by purchasing the remaining 65% of its outstanding common stock which increased the Company’s ownership interest from 35% to 100%, and provided the Company control. On April 4, 2016, Kelway was rebranded CDW UK. Throughout this report, the term "CDW UK" refers to Kelway. For further details regarding the acquisition, see Note 3 (Acquisition).

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements as of June 30, ~~2016~~2017 and for the three and six months ended June 30, ~~2016~~2017 and ~~2015~~2016 (the “Consolidated Financial Statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the ~~U.S.~~US Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (the “December 31, ~~2015~~2016 Consolidated Financial Statements”). The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in the December 31, ~~2015~~2016 Consolidated Financial Statements. In the opinion of management, the Consolidated Financial Statements contain all adjustments (consisting of a normal, recurring nature) necessary to present fairly the Company's financial position, results of operations, comprehensive income, cash flows and changes in stockholders' equity as of the dates and for the periods indicated. The unaudited results of operations for such interim periods reported are not necessarily indicative of results for the full year.

Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of Parent and its 100% owned subsidiaries. All intercompany transactions and accounts are eliminated in consolidation.

Use of Estimates

The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

The notes to the Consolidated Financial Statements contained in the December 31, ~~2015~~2016 Consolidated Financial Statements include ~~an additional~~a discussion of the significant accounting policies and estimates used in the preparation of the Company's Consolidated Financial Statements. There have been no material changes to the Company's significant accounting policies and estimates during the six months ended June 30, ~~2016.~~2017.

Accounting for Derivative Instruments

The Company has entered into interest rate cap agreements for the purpose of hedging its exposure to fluctuations in interest rates. The interest rate cap agreements are designated as cash flow hedges of interest rate risk and recorded at

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

fair value in Other assets on the Consolidated Balance Sheets. The gain or loss on the derivative instruments is reported as a component of Accumulated Other Comprehensive Loss (“AOCL”) until reclassified to Interest expense in the same period the hedge transaction affects earnings.


2.	Recent Accounting Pronouncements

Accounting for Goodwill Impairment

In January 2017, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), providing guidance for the elimination of Step 2 of the current two-step goodwill impairment test. A goodwill impairment loss will be measured as the excess of a reporting unit's carrying amount over its fair value. This ASU 2017-04 is effective for the Company beginning in the first quarter of 2020 and allows for early adoption. The adoption of this ASU is not expected to have a material impact on the Company's Consolidated Financial Statements.

Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), providing guidance for eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU 2016-15 is effective for the Company beginning in the first quarter of 2018 and allows for early adoption. The adoption of this ASU is not expected to have a material impact of the Company's Consolidated Financial Statements.

Measurement of Credit Losses on Financial Instruments

In June 2016, the ~~Financial Accounting Standards Board (the "FASB")~~FASB issued ~~Accounting Standards Update ("ASU")~~ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the assumptions, models and methods for estimating expected credit losses. This ASU is effective for the Company beginning in the first quarter of 2020 and allows for early adoption beginning in the first quarter of 2019. The Company is currently evaluating the impact the ASU will have on its Consolidated Financial Statements.

~~Improvements to Employee Share-Based Payment Accounting~~

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, requiring the recognition of the income tax effects of stock awards in the income statement when the awards are settled and allowing the Company to repurchase more of an employee's shares than allowed under current guidance, without triggering liability accounting. This ASU also addresses simplifications related to statement of cash flows classification and accounting for forfeitures. This ASU is effective for the Company beginning in the first quarter of 2017 and allows for early adoption. The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements.

Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. This ASU is effective for the Company beginning in the first quarter of 2019 and allows for early adoption. Although the Company is currently evaluating the provisions of the ASU to determine how it will be affected, the primary impact to the Company of the new ASU will be to record assets and liabilities for current operating leases.

~~Balance Sheet Classification of Deferred Taxes~~

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, simplifying the presentation of deferred income taxes by requiring all deferred taxes to be presented as noncurrent in the balance sheet. In the first quarter of 2016, the Company elected to early adopt ASU 2015-17 on a prospective basis. The ~~adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements.~~

~~Simplifying the Measurement of Inventory~~

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, amending the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value insteadmajority of the lower of cost or market value. This ASU is effective for the Company beginning in the first quarter of 2017, allows for early adoption and must be applied prospectively after the date of adoption. This ASU is not expectedCompany’s current operating leases relate to ~~have a material impact on the Company’s Consolidated Financial Statements.~~its real estate portfolio.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ~~replacing~~which, along with amendments issued in 2015 and 2016, will replace most existing revenue recognition guidance under GAAP and ~~eliminating industry specific~~eliminate industry-specific guidance. The core principle of the new guidance is that an entity should recognize revenue for the transfer of goods and services equal to an amount it expects to be entitled to receive for those goods and services.

~~In August 2015, the FASB issued~~ The ASU, ~~2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective date by one year.~~

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Gross versus Net), clarifying the principal versus agent guidance in the new revenue recognition standard, by revising the indicators to focus on evidence that the company is a principal.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, reducing the complexity when applying the guidance for identifying performance obligations and clarifying how to determine whether revenue related to a performance obligation for an intellectual property license is recognized over time or at a point in time.

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, clarifying certain core recognition principles including collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition.

~~These ASUs are~~as amended, will be effective for the Company beginning in the first quarter of 2018, ~~allow~~and allows for early adoption in the first quarter of ~~2017 and may be applied using either a full~~2017. The new guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective ~~approach~~method), or ~~a modified retrospective approach. The Company is currently evaluating~~retrospectively with the ~~method~~cumulative effect of ~~adoption and~~initially applying the ~~impact these ASUs will have on its Consolidated Financial Statements.~~


3.	~~Acquisition~~

On August 1, 2015, the Company completed the acquisition of CDW UK by purchasing the remaining 65% of its outstanding common stock which increased the Company's ownership interest from 35% to 100%, and provided the Company control.

~~A summary of the total consideration transferred is as follows:~~

(in millions) Acquisition-Date Fair Value
Cash $ 291.6
Fair value of CDW common stock⁽¹⁾
33.2
Fair value of previously held equity investment on the date of acquisition⁽²⁾
174.9
Total consideration $ 499.7

~~(1)~~

The Company issued 2 million shares of CDW common stock. The fair value of the common stock was based on the closing market price on July 31, 2015, adjusted for the lack of marketability as the shares of CDW common stock issued to the sellers are subject to a three-year lock up restriction from August 1, 2015. One of the sellers granted 1 million stock options to certain CDW UK coworkers over his shares of CDW common stock received in the transaction. The fair value of these stock options was $22 million, which has been accounted for as post-combination stock-based compensation and is being amortized over the weighted-average requisite service period of 3.2 years. Compensation expense for these options is included in Selling and administrative expenses in the Consolidated Statements of Operations.

~~(2)~~

As a result of the Company obtaining control over CDW UK, the Company’s previously held 35% equity investment was remeasured to fair value, resulting in a gain of $98 million included in Gain on remeasurement of equity investment in the Consolidated Statements of Operations. The fair value of the previously held equity investment was determined by management with the assistance of a third party valuation firm, based on information available as of the acquisition date.

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~The~~guidance recognized ~~amounts of identifiable assets acquired and liabilities assumed, translated using the foreign currency exchange rates on~~at the date of ~~acquisition, are as follows:~~initial application (the cumulative catch-up transition method).

(in millions)
Acquisition-Date Fair Value⁽¹⁾
Cash $ 27.8
Accounts receivable 135.7
Merchandise inventory 27.1
Property and equipment, net 11.4
Identified intangible assets⁽²⁾
289.8
Other assets 53.5
Total assets acquired 545.3
Accounts payable—trade (86.1 )
Deferred revenue (57.2 )
Other liabilities (41.7 )
Deferred tax liabilities (55.1 )
Debt (111.5 )
Total liabilities assumed (351.6 )
Total identifiable net assets 193.7

Goodwill 306.0

Total purchase price $ 499.7


~~(1)~~	The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. These fair values are subject to change within the measurement period.


~~(2)~~	~~Details of the identified intangible assets are as follows:~~

(in millions) Acquisition-Date Fair Value Weighted-Average Amortization Period (in years)
Customer relationships $ 260.8
13
Customer contracts 25.9
3
Developed technology 1.7
2
Trade name 1.4
1
Total identified intangible assets $ 289.8

The Company has established a cross-functional implementation team to analyze the effect of the ASU. The Company utilized a bottom-up approach to analyze the impact of the standard on its contract portfolio by reviewing the current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its revenue contracts. In addition, the Company identified, and is in the process of implementing, appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new

~~Goodwill in the amount~~

Table of $306 million was recognized in the acquisition of CDW UK and is attributable to the business from new customers and the value of the acquired assembled workforce. The goodwill was allocated to the CDW UK operating segment which is included with CDW Canada in an all other category (“Other”). The full amount of goodwill recognized is not deductible for income tax purposes in the United Kingdom.

The unaudited pro forma Consolidated Statements of Operations in the table below summarizes the combined results of operations of the Company and CDW UK, using historical foreign currency exchange rates, as if the acquisition had been completed on January 1, 2015, and gives effect to pro forma events that are factually supportable and directly attributable to the transaction. The unaudited pro forma results reflect adjustments for equity-based compensation, acquisition and integration costs, incremental intangible asset amortization based on the fair values of each identifiable intangible asset, which are subject to change within the measurement period, pre-acquisition equity earnings, the gain on the remeasurementContents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

standard. The implementation team has reported the findings and progress of the ~~Company’s previously held 35% equity method investment, elimination of pre-acquisition intercompany sales transactions~~project to management and the ~~impacts~~Audit Committee on a frequent basis.

The Company will adopt the guidance on January 1, 2018, and expects to utilize the full retrospective method. The Company’s ability to adopt using the full retrospective method is dependent on system readiness and the completion of its analysis of information necessary to recast prior period financial statements.

While the Company is still finalizing its accounting policies under the new standard, it has determined:

•the accounting for bill and hold transactions will result in revenue for certain ~~other pre-acquisition transactions. Pro forma adjustments were tax-effected at~~of those arrangements being recognized earlier than under current GAAP. This change will not materially impact Net sales or Net income;

•it will be deemed to be acting as an agent in transactions for certain software products sold with accompanying third-party delivered software assurance and therefore will recognize such revenue on a net basis. The Company currently recognizes these on a gross basis (i.e. acting as a principal). While this change will not impact reported Gross profit, the ~~statutory rates within~~Company estimates the ~~applicable jurisdictions.~~

~~This unaudited pro forma information is presented for informational purposes only and may not be indicative~~impact of this on the ~~historical~~2016 full-year results ~~of operations that~~ would have been ~~obtained if~~ to reduce both Net sales and Cost of sales by $200 - $300 million; and

•the ~~acquisition had taken place on January 1, 2015, nor~~accounting for revenue related to hardware, software (excluding the ~~results that may be obtained in the future. This unaudited pro forma information does not reflect future synergies, integration costs, or other such costs or savings.~~above) and professional services will remain substantially unchanged.

~~The unaudited pro forma Consolidated Statements of Operations for the three and six months ended June 30, 2015 is as follows:~~

(in millions) Three months ended Six months ended
Net sales $ 3,541.0
$ 6,513.6
Net income 115.7
171.7

~~The unaudited pro forma information above reflects the following adjustments:~~


~~(1)~~3.	~~Excludes acquisition and integration costs directly related to the transaction.~~


~~(2)~~	~~Includes additional amortization expense related to the fair value of acquired intangibles.~~


~~(3)~~	~~Excludes the Company's share of net income/loss from its previously held 35% equity investment prior to the completion of the acquisition.~~


~~(4)~~	~~Includes additional non-cash equity-based compensation related to equity awards granted to CDW UK coworkers after the completion of the acquisition.~~Goodwill

The Company performs an evaluation of goodwill, utilizing either a quantitative or qualitative impairment test, on an annual basis, or more frequently if circumstances or events require an evaluation. In connection with the segment change described in Note 11 (Segment Information), the Company performed a quantitative analysis of the legacy Corporate reporting unit's fair value prior to the allocation of goodwill to the Small Business reporting unit. Based on the results of the quantitative analysis performed as of January 1, 2017, the Company determined that the fair values of Corporate and Small Business reporting units exceeded their carrying values and no impairment existed. Using this valuation, the Company allocated the carrying value of goodwill between Small Business and Corporate based on the relative fair values determined by the quantitative test. The Public, CDW ~~CORPORATION AND SUBSIDIARIES~~UK and CDW Canada operating segments were not impacted by the segment change and therefore no impairment analysis was required.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


4.	Inventory Financing Agreements

The Company has entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions. These amounts are classified separately as Accounts payable-inventory financing on the Consolidated Balance Sheets. The Company does not incur any interest expense associated with these agreements as balances are paid when they are due. Amounts included in Accounts payable-inventory financing are as follows:

(in millions)
June 30,
2016
December 31, 2015
Revolving Loan inventory financing agreement⁽¹⁾
$ 498.4
$ 427.0
Other inventory financing agreements⁽²⁾
11.4
12.6
Accounts payable-inventory financing $ 509.8
$ 439.6


~~(1)~~	The Senior Secured Asset-Based Revolving Credit Facility includes an inventory floorplan sub-facility that enables the Company to maintain an inventory financing agreement with a financial intermediary to facilitate the purchase of inventory from certain vendors on more favorable terms than offered directly by the vendors.


~~(2)~~	As of June 30, 2016 and December 31, 2015, amounts owed under other inventory financing agreements of $1 million or less, for both periods, were collateralized by the inventory purchased under these financing agreements and a second lien on the related accounts receivable.


5.	~~Long-Term Debt~~

~~Long-term debt as of June 30, 2016 is as follows:~~

(dollars in millions)
Interest
Rate
Principal Unamortized Discount and Deferred Financing Costs Total
Senior secured asset-based revolving credit facility ⁽¹⁾

— % $ —

$ —

$ —
CDW UK revolving credit facility⁽²⁾
— % —
—
—
Senior secured term loan facility
3.25 % 1,490.4

(5.9 )
1,484.5
CDW UK term loan 1.99 % 74.5
(0.4 ) 74.1
Senior notes due 2022
6.0 % 600.0

(6.1 )
593.9
Senior notes due 2023
5.0 % 525.0

(5.7 )
519.3
Senior notes due 2024
5.5 % 575.0

(6.3 )
568.7
Total long-term debt 3,264.9
(24.4 ) 3,240.5
Less current maturities of long-term debt (26.1 ) —
(26.1 )
Long-term debt, excluding current maturities $ 3,238.8
$ (24.4 ) $ 3,214.4

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~Long-term debt as of December 31, 2015 is as follows:~~

(dollars in millions) Interest
Rate Principal Unamortized Discount and Deferred Financing Costs Total
Senior secured asset-based revolving credit facility ⁽¹⁾

— % $ —
$ —
$ —
CDW UK revolving credit facility ⁽²⁾
— % —
—
—
Senior secured term loan facility 3.25 % 1,498.1
(6.7 ) 1,491.4
CDW UK Term Loan 1.98 % 88.4
(0.6 ) 87.8
Senior notes due 2022 6.0 % 600.0
(6.6 ) 593.4
Senior notes due 2023 5.0 % 525.0
(6.2 ) 518.8
Senior notes due 2024 5.5 % 575.0
(6.7 ) 568.3
Total long-term debt 3,286.5
(26.8 ) 3,259.7
Less current maturities of long-term debt (27.2 ) —
(27.2 )
Long-term debt, excluding current maturities $ 3,259.3
$ (26.8 ) $ 3,232.5



(in millions)	June 30, 2017		December 31, 2016
Revolving Loan inventory financing agreement⁽¹⁾	$	474.7	$	558.3
Other inventory financing agreements⁽²⁾	21.7		22.1
Accounts payable-inventory financing	$	496.4	$	580.4

(1)

The Senior Secured Asset-Based Revolving Credit Facility (“Revolving Loan”) includes an inventory floorplan sub-facility that enables the Company to maintain an inventory financing agreement with a financial intermediary to facilitate the purchase of inventory from certain vendors on more favorable terms than offered directly by the vendors. As of June 30, 2016, the Company had no outstanding borrowings under the Revolving Loan, $2 million of undrawn letters of credit and $470 million reserved related to the floorplan sub-facility. As of June 30, 2016, the borrowing base was $1,448 million based on the amount of eligible inventory and accounts receivable balances as of May 31, 2016. The Company could have borrowed up to an additional $778 million under the Revolving Loan as of June 30, 2016.

(2)

~~The CDW UK Credit Facility is a multi-currency revolving credit facility, expiring on July 17, 2017, under which CDW UK is permitted to borrow an aggregate amount of £50.0 million ($67 million as~~As of June 30, ~~2016).~~ 2017 and December 31, 2016, amounts less than $1 million and $3 million, respectively, were collateralized by the inventory purchased under these financing agreements and a second lien on the related accounts receivable.

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.	Financial Instruments

The Company’s indebtedness creates interest rate risk on its variable-rate debt. The Company uses derivative financial instruments to manage its exposure to interest rate risk. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

The fair value of the Company’s interest rate cap agreements is classified as Level 2 in the fair value hierarchy. The valuation of the interest rate cap agreements is derived by using a discounted cash flow analysis on the expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. This analysis reflects the contractual terms of the interest rate cap agreements, including the period to maturity, and uses observable market-based inputs, including LIBOR curves and implied volatilities. The Company also incorporates insignificant credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. The counterparty credit spreads are based on publicly available credit information obtained from a third party credit data provider.

The Company entered into interest rate cap agreements. These agreements entitle the Company to payments from the counterparty of the amount, if any, by which three-month LIBOR exceeds 1.5% during the agreement period. The interest rate cap agreements are in effect from January 17, 2017 through December 31, 2018 with a combined notional amount of $1,400 million. As of June 30, 2017 and December 31, 2016, interest rate cap agreements had a fair value of $3 million and $5 million, respectively, and are classified within Other Assets on the Consolidated Balance Sheets.

During the first quarter of 2017, the Company designated the interest rate cap agreements as cash flow hedges. The effective portion of changes in the fair value of derivatives that qualify as cash flow hedges is recorded in AOCL and is subsequently reclassified into Interest expense in the period when the hedged forecasted transaction affects earnings. If a derivative is deemed to be ineffective, the ineffective portion of the change in fair value of the derivative is recognized directly in earnings. During the six months ended June 30, 2017, the Company’s interest rate cap agreements were deemed effective and the Company expects they will be effective for the next twelve months. The Company recorded a $1 million loss, net of tax benefit of $1 million, for the effective portion of the interest rate cap agreements in AOCL for the three months ended June 30, 2017. The Company recorded a $2 million loss, net of a tax benefit of $1 million, for the effective portion of the interest rate cap agreements in AOCL for the six months ended June 30, 2017. The Company expects to reclassify $1 million from AOCL into Interest expense during the next twelve months.

Prior to the election of hedge accounting treatment, the Company recognized less than $1 million of Interest income in the Company's Consolidated Statement of Operations for both the three and six months ended June 30, 2017 and less than $1 million of Interest expense for both the three and six months ended June 30, 2016 related to the changes in the fair value of the interest rate cap agreements.

For additional details, see Note 6 (Long-Term Debt).

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.	Long-Term Debt

Long-term debt as of June 30, 2017 is as follows:



(dollars in millions)	Interest Rate		Principal			Unamortized Discount and Deferred Financing Costs			Total
Senior secured asset-based revolving credit facility⁽¹⁾	3.3	%	$	54.0		$	—		$	54.0
CDW UK revolving credit facility	—	%	—			—			—
Senior secured term loan facility	3.2	%	1,475.6			(2.3		)	1,473.3
CDW UK term loan	1.7	%	72.9			(1.3		)	71.6
Senior notes due 2023	5.0	%	525.0			(4.9		)	520.1
Senior notes due 2024	5.5	%	575.0			(5.6		)	569.4
Senior notes due 2025	5.0	%	600.0			(7.8		)	592.2
Other long-term obligations			15.7			—			15.7
Total debt			3,318.2			(21.9		)	3,296.3
Less current maturities			(18.5		)	—			(18.5		)
Long-term debt, excluding current maturities			$	3,299.7		$	(21.9	)	$	3,277.8

~~Debt Covenants~~⁽¹⁾Represents a weighted-average interest rate.

Long-term debt as of December 31, 2016 is as follows:



(dollars in millions)	Interest Rate		Principal			Unamortized Discount and Deferred Financing Costs			Total
Senior secured asset-based revolving credit facility	—	%	$	—		$	—		$	—
CDW UK revolving credit facility	—	%	—			—			—
Senior secured term loan facility	3.3	%	1,483.0			(14.9		)	1,468.1
CDW UK Term Loan	1.8	%	69.1			(1.6		)	67.5
Senior notes due 2022	6.0	%	600.0			(5.6		)	594.4
Senior notes due 2023	5.0	%	525.0			(5.3		)	519.7
Senior notes due 2024	5.5	%	575.0			(6.0		)	569.0
Other long-term obligations			15.7			—			15.7
Total debt			3,267.8			(33.4		)	3,234.4
Less current maturities			(18.5		)	—			(18.5		)
Long-term debt, excluding current maturities			$	3,249.3		$	(33.4	)	$	3,215.9

Senior Secured Asset-based Revolving Credit Facility (“Revolving Loan”)

As of June 30, 2017, the Company had $54 million of outstanding borrowings, $1 million of undrawn letters of credit, $444 million reserved for the floorplan sub-facility and a borrowing base of $1,650 million, which is based on the amount of eligible inventory and accounts receivable balances as of May 31, 2017. Borrowings under the Revolving Loan are limited by a borrowing base. As of June 30, 2017, the Company could have borrowed up to an additional $1,016 million under the Revolving Loan. Borrowings are also limited by a minimum liquidity condition, which provides that, if excess cash availability is less than the lower of (i) $125 million and (ii) the greater of (a) 10.0% of the borrowing base, and (b) $100 million, the lenders are not required to lend additional amounts under the Revolving Loan unless the consolidated fixed charge coverage ratio, as defined, is at least 1.00 to 1.00.

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Borrowings under the Revolving Loan bear interest at a variable interest rate plus an applicable margin. The interest rate margin is based on one of two indices, either (i) LIBOR or (ii) the Alternate Base Rate (“ABR”), with the ABR being the greater of (a) the prime rate (b) the federal funds effective rate plus 50 basis points or (c) the one-month LIBOR plus 1.00%. The applicable margin varies (1.25% to 1.75% for LIBOR borrowings and 0.25% to 0.75% for ABR borrowings) depending upon average daily excess cash availability under the agreement evidencing the Revolving Loan.

On March 31, 2017, the Company amended, extended, and increased its Revolving Loan to a five-year, $1,450 million senior secured asset-based revolving credit facility, with the facility being available to the Company for borrowings, issuance of letters of credit and floorplan financing. The Revolving Loan matures on March 31, 2022. The Revolving Loan replaces the Company’s previous revolving loan credit facility that was to mature on June 6, 2019. The Revolving Loan (i) increases the overall revolving credit facility capacity available to the Company from $1,250 million to $1,450 million, (ii) maintains the maximum aggregate amount of increases that may be made to the revolving credit facility of $300 million, (iii) maintains the fees on the unused portion of the revolving credit facility at 25 basis points, (iv) makes permanent the 25 basis point reduction in the applicable interest rate margin that was previously conditioned on meeting certain credit ratings levels, and (v) maintains the existing inventory floorplan sub-facility. In connection with the amendment of the previous facility, the Company recorded a loss on extinguishment of long-term debt of $1 million in the Consolidated Statement of Operations for the six months ended June 30, 2017, representing a write-off of a portion of unamortized deferred financing costs. Fees of $4 million related to the Revolving Loan were capitalized as deferred financing costs and are being amortized over the five-year term of the facility on a straight-line basis. These deferred financing costs are recorded in the Other assets line on the Consolidated Balance Sheets.

Senior Secured Term Loan Facility (“Term Loan”)

On June 30, 2017, the outstanding principal amount of the Term Loan was $1,476 million, excluding $2 million of deferred financing costs. On February 28, 2017, the Company amended the Term Loan to reprice the facility, reducing interest rate margins by 25 basis points. Borrowings under the Term Loan bear interest at either (a) the ABR plus a margin or (b) LIBOR plus a margin, payable quarterly on the last day of each March, June, September and December. The margin is based upon a net leverage ratio as defined in the agreement governing the Term Loan, which is 1.00% for ABR borrowings and 2.00% for LIBOR borrowings as of June 30, 2017.

The Term Loan was issued at par. The Term Loan replaced the prior senior secured term loan facility (the “Prior Term Loan Facility”) that had an outstanding aggregate principal amount of $1,483 million. The Company is required to pay quarterly principal installments equal to 0.25% of the original principal amount of the Prior Term Loan Facility, with the remaining principal amount payable on the maturity date of August 17, 2023, which was retained from the Prior Term Loan Facility. In connection with this refinancing, the Company recorded a loss on extinguishment of long-term debt of $14 million in the Consolidated Statement of Operations for the six months ended June 30, 2017. This loss represented the write-off of a portion of the unamortized deferred financing costs of $5 million and unamortized discount related to the Prior Term Loan Facility of $9 million. In connection with the issuance of the Term Loan, the Company incurred and recorded $2 million in deferred financing fees, which is recorded as a reduction to the debt and presented in the above table as of June 30, 2017.

CDW UK Term Loan

On August 1, 2016, the Company entered into a new five-year £56 million ($73 million at June 30, 2017) aggregate principal amount term loan facility (“CDW UK Term Loan”), which replaced the prior senior secured term loan facility (the “Prior CDW UK Term Loan Facility”) that had an outstanding principal amount of £56 million. Fees of $1 million were capitalized as deferred financing costs and are being amortized over the loan on a straight-line basis.

Commencing during the quarter ending September 30, 2018, the Company is required to make annual principal installments of £5 million ($7 million as of June 30, 2017) with the remaining principal amount payable on the maturity date of August 1, 2021. Borrowings under the CDW UK Term Loan bear interest at LIBOR plus a margin, payable quarterly on the last day of each March, June, September and December. As of June 30, 2017, an interest rate of 1.69% was in effect, which represents LIBOR plus a 1.40% margin.

In connection with this refinancing, the Prior CDW UK Term Loan Facility was amended to include both the CDW UK Term Loan and a £50 million ($65 million at June 30, 2017) revolving credit facility (the “CDW UK Revolving Credit Facility”).

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.0% Senior Notes due 2022 (“2022 Senior Notes”)

On March 2, 2017, the proceeds from the issuance of the 2025 Senior Notes, discussed below, along with cash on hand and proceeds from Revolving Loan borrowings, were deposited with the trustee to redeem all of the remaining $600 million aggregate principal amount of the 2022 Senior Notes at a redemption price of 106.182% of the principal amount redeemed, plus accrued and unpaid interest through the date of redemption. The redemption date was April 2, 2017. On the same date, the indenture governing the 2022 Senior Notes was satisfied and discharged. In connection with this redemption, the Company recorded a loss on extinguishment of long-term debt of $43 million in the Consolidated Statement of Operations for the six months ended June 30, 2017. This loss represents $37 million in redemption premium and $6 million for the write-off of the remaining deferred financing costs related to the 2022 Senior Notes.

5.0% Senior Notes due 2023 (“2023 Senior Notes”)

At June 30, 2017, the outstanding principal amount of the 2023 Senior Notes was $525 million. The 2023 Notes will mature on September 1, 2023 and bear interest rate of 5.0% per annum, payable semi-annually on March 1 and September 1 of each year.

5.5% Senior Notes due 2024 (“2024 Senior Notes”)

At June 30, 2017, the outstanding principal amount of the 2024 Senior Notes was $575 million. The 2024 Senior Notes will mature on December 1, 2024 and bear interest at a rate of 5.5% per annum, payable semi-annually on June 1 and December 1 of each year.

5.0% Senior Notes due 2025 (“2025 Senior Notes”)

At June 30, 2017, the outstanding principal amount of the 2025 Senior Notes was $600 million. The 2025 Senior Notes will mature on September 1, 2025 and bear interest at a rate of 5.0% per annum, payable semi-annually on March 1 and September 1 of each year.

On March 2, 2017, the Company completed the issuance of $600 million aggregate principal amount of 5.0% Senior Notes due 2025 at par. In connection with the issuance of the 2025 Senior Notes, the Company incurred and recorded $8 million in deferred financing fees, which is recorded as a reduction to the debt and presented in the above table as of June 30, 2017.

Debt Covenants

CDW LLC is the borrower under the Term Loan and Revolving Loan. CDW LLC and CDW Finance Corporation are the co-issuers of the 2023, 2024 and 2025 Senior Notes (“Senior Notes”). The obligations under the Term Loan, the Revolving Loan and the Senior Notes are guaranteed by Parent and each of CDW LLC's direct and indirect, wholly owned, US subsidiaries (the “Guarantors”).

As of June 30, 2017, the Company remained in compliance with the covenants under its various credit ~~agreements, the most restrictive of which is under the credit agreement governing the Senior Secured~~agreements. The Term Loan ~~Facility ("Term Loan"). Under the Term Loan, there are~~contains negative covenants that, among other things, place restrictions and limitations on the ability of ~~CDW~~the Guarantors to ~~pay dividends,~~dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make ~~share repurchases, redeem subordinated~~distributions or other restricted payments, create liens, make equity or debt ~~and~~investments, make acquisitions, engage in mergers or consolidations or engage in certain ~~other transactions.~~transactions with affiliates. As of June 30, ~~2016,~~2017, the amount of CDW’s restricted payment capacity under the Term Loan was ~~$680~~$991 million. However, the Company is separately permitted to make restricted payments, so long as the total net leverage ratio is less than ~~3.25~~3.25:1.00 on a pro forma basis. The total net leverage ratio was ~~2.9~~2.81:1.00 as of June 30, ~~2016.~~2017.

The CDW UK Term Loan Agreement imposes restrictions on CDW UK's ability to transfer funds to the Company through the payment of dividends, repayment of intercompany loans, advances or ~~the repayment of~~ subordinated debt that require, among other things, the maintenance of a minimum net leverage ratio. As of June 30, ~~2016,~~2017, the amount of ~~such~~ restricted ~~net assets for~~payment capacity under the CDW UK Term Loan was ~~$410 million, which was primarily comprised~~$93 million.

Table of ~~goodwill and intangible assets.~~Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value

The fair values of the ~~2022, 2023 and 2024~~ Senior Notes were estimated using quoted market prices for identical liabilities that are traded in over-the-counter secondary markets that are not considered active. The fair value of the Term Loan was estimated using dealer quotes for identical liabilities in markets that are not considered active. ~~Consequently,~~The Senior Notes, Term Loan and the ~~Company's long-term debt is~~CDW UK Term Loan are classified as Level 2 within the fair value hierarchy. The ~~fair~~carrying value of the CDW UK Term Loan was ~~estimated using a discounted cash flow analysis based on current incremental borrowing rates for similar arrangements.~~£56 million ($73 million at June 30, 2017), which approximated fair value. The approximate fair values and related carrying values of the Company's long-term debt, including current maturities and excluding unamortized discount and unamortized deferred financing costs, were as follows:

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

(in millions) June 30, 2016 December 31,
2015
Fair value $ 3,309.7
$ 3,330.4
Carrying value 3,264.9
3,286.5

~~Interest Rate Cap Agreements~~

In order to manage the risk associated with changes in interest rates on borrowings under the Term Loan, the Company maintains interest rate cap agreements. As of June 30, 2016 the interest rate cap agreements had a combined notional amount of $1,400 million and are effective from January 14, 2015 through January 14, 2017. Under these agreements, the Company has the right to receive payments equal to the amount, if any, by which the three-month LIBOR exceeds 2.0% during the agreement period. The fair value of the Company's interest rate cap agreements was less than $1 million as of June 30, 2016 and December 31, 2015.



(in millions)	June 30, 2017		December 31, 2016
Fair value	$	3,417.5	$	3,334.8
Carrying value	3,318.2		3,267.8


6.7.	Income Taxes

Income tax expense was $55 million for the three months ended June 30, 2017, compared to $70 million for the same period of the prior year. The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 27.9% for the three months ended June 30, 2017 and differed from the US federal statutory rate primarily due to $19 million of excess tax benefits on equity compensation. The effective tax rate for the same period of the prior year was 37.3% and differed from the US federal statutory rate primarily due to state and local income taxes.

Income tax expense was $71 million for the six months ended June 30, 2017, compared to $116 million for the same period of the prior year. The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 26.2% for the six months ended June 30, 2017 and differed from the US federal statutory rate primarily due to $30 million of excess tax benefits on equity compensation. The effective tax rate for the same period of the prior year was 37.3% and differed from the US federal statutory rate primarily due to state and local income taxes.


8.	Earnings per Share

The numerator for both basic and diluted earnings per share is Net income. The denominator for basic earnings per share is the weighted-average shares outstanding during the period. A reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding is as follows:


	Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended June 30,		Six Months Ended June 30,
(in millions)	2016	2015	2016	2015	2017	2016	2017	2016
Basic weighted-average shares outstanding	164.9	171.0	166.1	171.6	156.0	164.9	157.7	166.1
Effect of dilutive securities⁽¹⁾	1.8	1.5	1.7	1.4	3.0	1.8	3.2	1.7
Diluted weighted-average shares outstanding⁽²⁾	166.7	172.5	167.8	173.0	159.0	166.7	160.9	167.8


(1)	The dilutive effect of outstanding stock options, restricted stock units, restricted stock, performance share units and Coworker Stock Purchase Plan units is reflected in the diluted weighted-average shares outstanding using the treasury stock method.


(2)	There were less than 1 million potential common shares excluded from diluted weighted-average shares outstanding for both the three and six months ended June 30, ~~2016~~2017 and ~~2015, respectively,~~2016 as their inclusion would have had an anti-dilutive effect.

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.9.	~~Commitments and Contingencies~~Equity-Based Compensation

On December 31, 2016, 748,855 Performance Share Units (“PSUs”) under the 2013 Long-Term Incentive Plan vested, representing a vesting rate for the 2014-2016 performance period of 193.5% of target. The PSUs had a weighted-average grant-date fair value of $24.40 per unit. In connection with the PSUs that vested, the Company distributed shares of common stock to each participant during the six months ended June 30, 2017 and withheld the number of shares of common stock equal to the respective tax withholding for each participant. The Company was required to pay withholding taxes of $18 million to federal, state and foreign taxing authorities for the vesting of these PSUs. This amount is reported as a financing activity in the Consolidated Statement of Cash Flows and as an increase to Accumulated Deficit in the Consolidated Statement of Shareholders' Equity for the six months ended June 30, 2017.

On June 26, 2017, an aggregate of 997,450 Restricted Stock Units (“RSUs”) under the 2013 Long-Term Incentive Plan vested. The RSUs had a weighted-average grant-date fair value of $17.04 per unit. In connection with the RSUs that vested, the Company distributed shares of common stock to each participant during the six months ended June 30, 2017 and withheld the number of shares of common stock equal to the respective tax withholding for each participant. The Company was required to pay withholding taxes of $24 million to federal, state and foreign taxing authorities for the vesting of these RSUs. This amount is reported as a financing activity in the Consolidated Statement of Cash Flows and as an increase to Accumulated Deficit in the Consolidated Statement of Shareholders' Equity for the six months ended June 30, 2017.

10. Commitments and Contingencies

The Company is party to various legal proceedings that arise in the ordinary course of its business, which include commercial, intellectual property, employment, tort and other litigation matters. The Company is also subject to audit by federal, state, international, national, provincial and local authorities, and by various 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 petitions for reorganization or liquidation under the US bankruptcy laws or similar laws of ~~the~~ jurisdictions ~~for the Company’s business activities~~ outside of the US. In such cases, certain pre-petition payments received by the Company could be considered preference items and subject to return to the bankruptcy administrator.

On October 29, 2015, the Company received a request for production of documents in connection with an investigation by the SEC of the Company’s vendor partner program incentives. The Company has produced documents to the SEC and is continuing to cooperate with the SEC in this matter.

As of June 30, ~~2016,~~2017, the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company's financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.

~~CDW CORPORATION AND SUBSIDIARIES~~On October 29, 2015, the Company learned of an investigation by the SEC of the Company’s vendor partner program incentives. On May 19, 2017, the SEC Staff informed the Company that the SEC has concluded its investigation and does not intend to recommend an enforcement action. The investigation did not have any impact on the Company’s financial condition or results of operations other than customary costs related to the Company’s cooperation with the investigation.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


8.11.	Segment Information

Effective January 1, 2017, the Company established Small Business as its own operating and reportable segment to align the Company's financial reporting with the manner in which the Chief Operating Decision Maker assesses performance and makes resource allocation decisions.

Small Business results were previously presented within the Corporate segment as a sales channel. Segment information reported below in prior periods has been reclassified to conform to the current period presentation. The Company now has ~~two~~three reportable segments: Corporate, ~~which is comprised~~ primarily ofserving private sector business customers ~~in the US,~~with more than 250 employees, Small Business, primarily serving private sector business customers with up to 250 employees, and Public, which is comprised of government agencies and education and healthcare institutions in the ~~US.~~U.S. The Company has two other operating segments: CDW Canada and CDW UK, both of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category (“Other”). Effective January 1, 2016, CDW Advanced Services is no longer an operating segment. Its results have been allocated to the Corporate and Public segments to align the Company's financial reporting with the manner in which the Chief Operating Decision Maker assesses performance and makes resource allocation decisions. Segment information reported in prior periods has been reclassified to conform to the current period presentation.

~~Information about the Company’s segments for the three and six months ended June 30, 2016 and 2015 is as follows:~~

(in millions)
Corporate
Public
Other
Headquarters
Total
Three Months Ended June 30, 2016:

Net sales
$ 1,779.2

$ 1,547.0

$ 338.4

$ —

$ 3,664.6
Income (loss) from operations⁽¹⁾

135.2

108.3

9.4

(29.4 )
223.5
Depreciation and amortization expense
(25.9 )
(11.1 )
(8.3 )
(18.4 )
(63.7 )

Three Months Ended June 30, 2015:

Net sales
$ 1,798.6

$ 1,388.5

$ 126.9

$ —

$ 3,314.0
Income (loss) from operations⁽¹⁾

138.8

91.0

4.3

(28.2 )
205.9
Depreciation and amortization expense
(25.8 )
(11.2 )
(0.4 )
(15.2 )
(52.6 )

(in millions) Corporate Public Other Headquarters Total
Six Months Ended June 30, 2016:
Net sales $ 3,471.4
$ 2,616.5
$ 693.4
$ —
$ 6,781.3
Income (loss) from operations⁽¹⁾
253.4
166.7
17.5
(53.1 ) 384.5
Depreciation and amortization expense (51.7 ) (22.3 ) (16.9 ) (36.8 ) (127.7 )

Six Months Ended June 30, 2015:
Net sales $ 3,409.0
$ 2,405.7
$ 254.5
$ —
$ 6,069.2
Income (loss) from operations⁽¹⁾
257.4
146.4
9.2
(55.5 ) 357.5
Depreciation and amortization expense (51.5 ) (22.3 ) (0.7 ) (30.6 ) (105.1 )


~~(1)~~	~~Certain costs related to technology specialists have been reclassified between our Corporate and Public segments. Prior periods have been reclassified to conform to the current period presentation.~~

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Information about the Company’s segments is as follows:



(in millions)	Corporate			Small Business			Public			Other			Headquarters			Total
Three Months Ended June 30, 2017:
Net sales	$	1,630.7		$	321.5		$	1,674.1		$	368.1		$	—		$	3,994.4
Income (loss) from operations	127.1			19.3			104.5			12.6			(32.4		)	231.1
Depreciation and amortization expense	(20.8		)	(5.1		)	(11.2		)	(7.6		)	(20.7		)	(65.4		)

Three Months Ended June 30, 2016:
Net sales	$	1,490.8		$	288.4		$	1,547.0		$	338.4		$	—		$	3,664.6
Income (loss) from operations	117.5			17.7			108.3			9.4			(29.4		)	223.5
Depreciation and amortization expense	(20.7		)	(5.2		)	(11.1		)	(8.3		)	(18.4		)	(63.7		)



(in millions)	Corporate			Small Business			Public			Other			Headquarters			Total
Six Months Ended June 30, 2017:
Net sales	$	3,107.0		$	620.2		$	2,850.6		$	741.3		$	—		$	7,319.1
Income (loss) from operations	238.5			36.0			165.1			25.2			(63.9		)	$	400.9
Depreciation and amortization expense	(41.7		)	(10.3		)	(22.4		)	(14.6		)	(40.5		)	$	(129.5	)

Six Months Ended June 30, 2016:
Net sales	$	2,905.7		$	565.7		$	2,616.5		$	693.4		$	—		$	6,781.3
Income (loss) from operations	219.1			34.3			166.7			17.5			(53.1		)	$	384.5
Depreciation and amortization expense	(41.4		)	(10.3		)	(22.3		)	(16.9		)	(36.8		)	$	(127.7	)


9.12.	Supplemental Guarantor Information

The ~~2022~~2023 Senior Notes, the ~~2023~~2024 Senior Notes and the ~~2024~~2025 Senior Notes are, and, prior to being redeemed in full, the ~~2019~~2022 Senior Notes were, guaranteed by the Parent and each of CDW LLC’s direct and indirect, 100% owned, domestic subsidiaries (the “Guarantor Subsidiaries”). All guarantees by the Parent and the Guarantor Subsidiaries are and were joint and several, and full and unconditional; provided that guarantees by the Guarantor Subsidiaries (i) are subject to certain customary release provisions contained in the indentures governing the ~~2022~~2023 Senior Notes, the ~~2023~~2024 Senior Notes and the ~~2024~~2025 Senior Notes and (ii) were subject to certain customary release provisions contained in the ~~indentures~~indenture governing the ~~2019~~2022 Senior Notes until such ~~indentures were~~indenture was satisfied and discharged in the first quarter of ~~2015.~~2017. CDW LLC's 100% owned foreign subsidiaries, CDW International Holdings Limited, which is comprised of CDW UK and CDW Canada (together the “Non-Guarantor Subsidiaries”), do not guarantee the debt obligations. CDW LLC and CDW Finance Corporation, as co-issuers, are 100% owned 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 June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, Consolidating Statements of Operations for the three and six months ended June 30, ~~2016~~2017 and ~~2015,~~2016, condensed Consolidating Statements of Comprehensive Income for the three and six months ended June 30, ~~2016~~2017 and ~~2015~~2016 and condensed Consolidating Statements of Cash Flows for the six months ended June 30, ~~2016~~2017 and ~~2015,~~2016, in accordance with Rule 3-10 of Regulation S-X. The consolidating financial information includes the accounts of CDW Corporation (the “Parent Guarantor”), which has no independent assets or operations, the accounts of CDW LLC (the “Subsidiary Issuer”), the combined accounts of the Guarantor Subsidiaries, the accounts of the Non-Guarantor Subsidiaries, and the accounts of CDW Finance Corporation (the “Co-Issuer”) for the periods indicated. The information was prepared on the same basis as the Consolidated Financial Statements.

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Condensed Consolidating Balance Sheet
June 30, 2016
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries
Co-Issuer
Consolidating
Adjustments
Consolidated
Assets
Current assets:
Cash and cash equivalents $ —
$ 81.4
$ —
$ 69.7
$ —
$ (21.7 ) $ 129.4
Accounts receivable, net —
0.2
1,883.8
198.5
—
—
2,082.5
Merchandise inventory —
—
433.7
53.6
—
—
487.3
Miscellaneous receivables —
87.4
151.0
21.9
—
—
260.3
Prepaid expenses and other —
17.0
61.9
36.9
—
—
115.8
Total current assets —
186.0
2,530.4
380.6
—
(21.7 ) 3,075.3
Property and equipment, net —
103.8
50.0
10.0
—
—
163.8
Goodwill —
751.8
1,439.0
284.2
—
—
2,475.0
Other intangible assets, net —
300.1
635.0
226.9
—
—
1,162.0
Other assets 3.5
20.1
262.4
4.1
—
(278.3 ) 11.8
Investment in and advances to subsidiaries 1,009.9
3,169.0
—
—
—
(4,178.9 ) —
Total assets $ 1,013.4
$ 4,530.8
$ 4,916.8
$ 905.8
$ —
$ (4,478.9 ) $ 6,887.9
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable—trade $ —
$ 19.7
$ 959.1
$ 121.0
$ —
$ (21.7 ) $ 1,078.1
Accounts payable—inventory financing —
—
499.2
10.6
—
—
509.8
Current maturities of
long-term debt
—
15.5
—
10.6
—
—
26.1
Deferred revenue —
—
77.0
67.6
—
—
144.6
Accrued expenses —
172.9
207.7
38.5
—
—
419.1
Total current liabilities —
208.1
1,743.0
248.3
—
(21.7 ) 2,177.7
Long-term liabilities:
Debt —
3,150.9
—
63.5
—
—
3,214.4
Deferred income taxes —
107.5
240.6
76.2
—
(3.5 ) 420.8
Other liabilities —
54.4
3.4
278.6
—
(274.8 ) 61.6
Total long-term liabilities —
3,312.8
244.0
418.3
—
(278.3 ) 3,696.8
Total stockholders’ equity 1,013.4
1,009.9
2,929.8
239.2
—
(4,178.9 ) 1,013.4
Total liabilities and stockholders’ equity $ 1,013.4
$ 4,530.8
$ 4,916.8
$ 905.8
$ —
$ (4,478.9 ) $ 6,887.9

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Condensed Consolidating Balance Sheet
December 31, 2015
June 30, 2017																June 30, 2017
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiary		Co-Issuer		Consolidating Adjustments			Consolidated		Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	45.1	$	—	$	31.9	$	—	$	(39.4	)	$	37.6	$	—	$	67.0	$	—		$	38.5		$	—	$	(26.5	)	$	79.0
Accounts receivable, net	—		—		1,788.6		228.8		—		—			2,017.4		—		—		2,080.8			254.5			—		—			2,335.3
Merchandise inventory	—		—		340.3		52.8		—		—			393.1		—		—		434.3			79.3			—		—			513.6
Miscellaneous receivables	—		83.7		90.1		24.6		—		—			198.4		—		100.3		214.2			23.3			—		—			337.8
Prepaid expenses and other	—		13.0		50.4		84.0		—		(3.1		)	144.3		—		18.8		68.7			43.5			—		—			131.0
Total current assets	—		141.8		2,269.4		422.1		—		(42.5		)	2,790.8		—		186.1		2,798.0			439.1			—		(26.5		)	3,396.7
Property and equipment, net	—		110.0		54.1		11.3		—		—			175.4		—		100.1		47.7			12.9			—		—			160.7
Goodwill	—		751.8		1,439.0		309.6		—		—			2,500.4		—		751.8		1,439.0			278.5			—		—			2,469.3
Other intangible assets, net	—		306.0		704.9		265.5		—		—			1,276.4		—		284.6		494.5			197.5			—		—			976.6
Other assets	3.8		17.3		263.0		3.0		—		(274.8		)	12.3		2.9		18.8		216.2			0.1			—		(199.7		)	38.3
Investment in and advances to subsidiaries	1,092.1		3,302.0		—		—		—		(4,394.1		)	—		872.5		3,022.8		(24.0		)	(2.0		)	—		(3,869.3		)	—
Total assets	$	1,095.9	$	4,628.9	$	4,730.4	$	1,011.5	$	—	$	(4,711.4	)	$	6,755.3	$	875.4	$	4,364.2	$	4,971.4		$	926.1		$	—	$	(4,095.5	)	$	7,041.6
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	—	$	31.0	$	727.4	$	147.5	$	—	$	(39.4	)	$	866.5
Accounts payable-inventory financing	—		—		428.4		11.4		—		(0.2		)	439.6
Accounts payable—trade																$	—	$	25.2	$	1,241.3		$	151.6		$	—	$	(26.5	)	$	1,391.6
Accounts payable—inventory financing																—		—		475.7			20.7			—		—			496.4
Current maturities of long-term debt	—		15.4		—		11.8		—		—			27.2		—		14.9		3.6			—			—		—			18.5
Deferred revenue	—		—		77.4		74.5		—		—			151.9		—		—		86.1			94.8			—		—			180.9
Accrued expenses	—		156.0		190.9		58.6		—		(3.4		)	402.1		—		201.0		210.5			56.6			—		(0.3		)	467.8
Total current liabilities	—		202.4		1,424.1		303.8		—		(43.0		)	1,887.3		—		241.1		2,017.2			323.7			—		(26.8		)	2,555.2
Long-term liabilities:
Debt	—		3,156.5		—		76.0		—		—			3,232.5		—		3,194.2		12.2			71.4			—		—			3,277.8
Deferred income taxes	—		117.3		272.8		83.4		—		(3.9		)	469.6		—		90.3		175.7			66.4			—		(2.9		)	329.5
Other liabilities	—		60.7		2.9		276.8		—		(270.4		)	70.0		—		24.0		6.1			212.3			—		(212.4		)	30.0
Total long-term liabilities	—		3,334.5		275.7		436.2		—		(274.3		)	3,772.1		—		3,308.5		194.0			350.1			—		(215.3		)	3,637.3
Total stockholders’ equity	1,095.9		1,092.0		3,030.6		271.5		—		(4,394.1		)	1,095.9		875.4		814.6		2,760.2			252.3			—		(3,853.4		)	849.1
Total liabilities and stockholders’ equity	$	1,095.9	$	4,628.9	$	4,730.4	$	1,011.5	$	—	$	(4,711.4	)	$	6,755.3	$	875.4	$	4,364.2	$	4,971.4		$	926.1		$	—	$	(4,095.5	)	$	7,041.6

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Consolidating Statement of Operations
Three Months Ended June 30, 2016
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries
Co-Issuer
Consolidating
Adjustments
Consolidated
Net sales $ —
$ —
$ 3,326.2
$ 338.4
$ —
$ —
$ 3,664.6
Cost of sales —
—
2,771.3
282.8
—
—
3,054.1
Gross profit —
—
554.9
55.6
—
—
610.5
Selling and administrative expenses —
29.4
270.5
44.8
—
—
344.7
Advertising expense —
—
40.9
1.4
—
—
42.3
Income (loss) from operations —
(29.4 ) 243.5
9.4
—
—
223.5
Interest (expense) income, net —
(37.5 ) 2.5
(1.9 ) —
—
(36.9 )
Other income (expense), net —
—
—
0.9
—
—
0.9
Income (loss) before income taxes —
(66.9 ) 246.0
8.4
—
—
187.5
Income tax benefit (expense) —
25.2
(92.9 ) (2.3 ) —
—
(70.0 )
Income (loss) before equity in earnings of subsidiaries —
(41.7 ) 153.1
6.1
—
—
117.5
Equity in earnings of subsidiaries 117.5
159.2
—
—
—
(276.7 ) —
Net income $ 117.5
$ 117.5
$ 153.1
$ 6.1
$ —
$ (276.7 ) $ 117.5

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Consolidating Statement of Operations
Three Months Ended June 30, 2015⁽¹⁾
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiary
Co-Issuer
Consolidating
Adjustments
Consolidated
Net sales $ —
$ —
$ 3,187.2
$ 126.8
$ —
$ —
$ 3,314.0
Cost of sales —
—
2,667.9
111.6
—
—
2,779.5
Gross profit —
—
519.3
15.2
—
—
534.5
Selling and administrative expenses —
27.9
252.9
9.8
—
—
290.6
Advertising expense —
—
36.9
1.1
—
—
38.0
Income (loss) from operations —
(27.9 ) 229.5
4.3
—
—
205.9
Interest (expense) income, net —
(37.8 ) —
—
—
—
(37.8 )
Other income (expense), net —
3.8
0.3
(0.1 ) —
—
4.0
Income (loss) before income taxes —
(61.9 ) 229.8
4.2
—
—
172.1
Income tax benefit (expense) —
23.0
(85.7 ) (1.2 ) —
—
(63.9 )
Income (loss) before equity in earnings of subsidiaries —
(38.9 ) 144.1
3.0
—
—
108.2
Equity in earnings of subsidiaries 108.2
147.1
—
—
—
(255.3 ) —
Net income $ 108.2
$ 108.2
$ 144.1
$ 3.0
$ —
$ (255.3 ) $ 108.2

~~(1) Certain amounts have been reclassified to conform to the current period presentation.~~

Condensed Consolidating Balance Sheet

December 31, 2016
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Co-Issuer		Consolidating Adjustments			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	222.7	$	3.1	$	37.9	$	—	$	—		$	263.7
Accounts receivable, net	—		—		1,904.9		263.7		—		—			2,168.6
Merchandise inventory	—		—		390.6		61.4		—		—			452.0
Miscellaneous receivables	—		92.6		130.1		12.2		—		—			234.9
Prepaid expenses and other	—		14.3		69.0		35.6		—		—			118.9
Total current assets	—		329.6		2,497.7		410.8		—		—			3,238.1
Property and equipment, net	—		105.6		49.3		8.8		—		—			163.7
Goodwill	—		751.8		1,439.0		264.2		—		—			2,455.0
Other intangible assets, net	—		291.5		565.1		199.0		—		—			1,055.6
Other assets	3.2		19.4		248.2		1.5		—		(236.3		)	36.0
Investment in and advances to subsidiaries	1,042.3		3,026.5		—		—		—		(4,068.8		)	—
Total assets	$	1,045.5	$	4,524.4	$	4,799.3	$	884.3	$	—	$	(4,305.1	)	$	6,948.4
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	—	$	25.9	$	895.3	$	151.7	$	—	$	—		$	1,072.9
Accounts payable-inventory financing	—		1.2		559.5		19.7		—		—			580.4
Current maturities of long-term debt	—		14.9		3.6		—		—		—			18.5
Deferred revenue	—		—		100.8		71.8		—		—			172.6
Accrued expenses	—		173.9		214.8		47.7		—		(0.1		)	436.3
Total current liabilities	—		215.9		1,774.0		290.9		—		(0.1		)	2,280.7
Long-term liabilities:
Debt	—		3,136.3		12.1		67.5		—		—			3,215.9
Deferred income taxes	—		99.1		205.4		67.9		—		(3.2		)	369.2
Other liabilities	—		30.8		3.6		235.7		—		(233.0		)	37.1
Total long-term liabilities	—		3,266.2		221.1		371.1		—		(236.2		)	3,622.2
Total stockholders’ equity	1,045.5		1,042.3		2,804.2		222.3		—		(4,068.8		)	1,045.5
Total liabilities and stockholders’ equity	$	1,045.5	$	4,524.4	$	4,799.3	$	884.3	$	—	$	(4,305.1	)	$	6,948.4

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Consolidating Statement of Operations																				Consolidating Statement of Operations

Consolidating Statement of Operations
Six Months Ended June 30, 2016
Three Months Ended June 30, 2017																				Three Months Ended June 30, 2017
(in millions)	Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated			Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Net sales	$	—	$	—		$	6,087.9		$	693.4		$	—	$	—		$	6,781.3		$	—	$	—		$	3,626.2		$	368.2		$	—	$	—		$	3,994.4
Cost of sales	—		—			5,062.8			583.5			—		—			5,646.3			—		—			3,045.8			307.5			—		—			3,353.3
Gross profit	—		—			1,025.1			109.9			—		—			1,135.0			—		—			580.4			60.7			—		—			641.1
Selling and administrative expenses	—		53.1			531.1			89.8			—		—			674.0			—		32.4			284.7			46.4			—		—			363.5
Advertising expense	—		—			73.9			2.6			—		—			76.5			—		—			44.9			1.6			—		—			46.5
Income (loss) from operations	—		(53.1		)	420.1			17.5			—		—			384.5			—		(32.4		)	250.8			12.7			—		—			231.1
Interest (expense) income, net	—		(74.8		)	3.8			(4.0		)	—		—			(75.0		)	—		(35.4		)	1.1			(1.6		)	—		—			(35.9		)
Other income, net	—		—			0.7			1.2			—		—			1.9
Other income																				—		—			—			0.3			—		—			0.3
Income (loss) before income taxes	—		(127.9		)	424.6			14.7			—		—			311.4			—		(67.8		)	251.9			11.4			—		—			195.5
Income tax benefit (expense)	—		48.6			(160.5		)	(4.2		)	—		—			(116.1		)	—		29.3			(80.7		)	(3.1		)	—		—			(54.5		)
Income (loss) before equity in earnings of subsidiaries	—		(79.3		)	264.1			10.5			—		—			195.3			—		(38.5		)	171.2			8.3			—		—			141.0
Equity in earnings of subsidiaries	195.3		274.6			—			—			—		(469.9		)	—			141.1		179.6			—			—			—		(320.7		)	—
Net income	$	195.3	$	195.3		$	264.1		$	10.5		$	—	$	(469.9	)	$	195.3		$	141.1	$	141.1		$	171.2		$	8.3		$	—	$	(320.7	)	$	141.0

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Consolidating Statement of Operations																				Consolidating Statement of Operations

Consolidating Statement of Operations
Six Months Ended June 30, 2015⁽¹⁾
Three Months Ended June 30, 2016																				Three Months Ended June 30, 2016
(in millions)	Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Co-Issuer		Consolidating Adjustments			Consolidated			Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Net sales	$	—	$	—		$	5,814.7		$	254.5		$	—	$	—		$	6,069.2		$	—	$	—		$	3,326.2		$	338.4		$	—	$	—		$	3,664.6
Cost of sales	—		—			4,854.2			224.0			—		—			5,078.2			—		—			2,771.3			282.8			—		—			3,054.1
Gross profit	—		—			960.5			30.5			—		—			991.0			—		—			554.9			55.6			—		—			610.5
Selling and administrative expenses	—		55.2			491.4			19.5			—		—			566.1			—		29.4			270.5			44.8			—		—			344.7
Advertising expense	—		—			65.6			1.8			—		—			67.4			—		—			40.9			1.4			—		—			42.3
Income (loss) from operations	—		(55.2		)	403.5			9.2			—		—			357.5			—		(29.4		)	243.5			9.4			—		—			223.5
Interest (expense) income, net	—		(82.8		)	—			0.2			—		—			(82.6		)	—		(37.5		)	2.5			(1.9		)	—		—			(36.9		)
Net loss on extinguishments of long-term debt	—		(24.3		)	—			—			—		—			(24.3		)
Other income (expense), net	—		7.9			1.0			(0.4		)	—		—			8.5
Other income																				—		—			—			0.9			—		—			0.9
Income (loss) before income taxes	—		(154.4		)	404.5			9.0			—		—			259.1			—		(66.9		)	246.0			8.4			—		—			187.5
Income tax benefit (expense)	—		57.8			(151.5		)	(2.5		)	—		—			(96.2		)	—		25.2			(92.9		)	(2.3		)	—		—			(70.0		)
Income (loss) before equity in earnings of subsidiaries	—		(96.6		)	253.0			6.5			—		—			162.9			—		(41.7		)	153.1			6.1			—		—			117.5
Equity in earnings of subsidiaries	162.9		259.5			—			—			—		(422.4		)	—			117.5		159.2			—			—			—		(276.7		)	—
Net income	$	162.9	$	162.9		$	253.0		$	6.5		$	—	$	(422.4	)	$	162.9		$	117.5	$	117.5		$	153.1		$	6.1		$	—	$	(276.7	)	$	117.5

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Condensed Consolidating Statement of Comprehensive Income
Three Months Ended June 30, 2016
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries
Co-Issuer
Consolidating
Adjustments
Consolidated
Comprehensive income $ 82.5
$ 82.5
$ 153.1
$ (28.9 ) $ —
$ (206.7 ) $ 82.5

Condensed Consolidating Statement of Comprehensive Income
Three Months Ended June 30, 2015
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiary
Co-Issuer
Consolidating
Adjustments
Consolidated
Comprehensive income $ 112.9
$ 112.9
$ 144.1
$ 7.8
$ —
$ (264.8 ) $ 112.9

Condensed Consolidating Statement of Comprehensive Income
Six Months Ended June 30, 2016
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiary
Co-Issuer
Consolidating
Adjustments
Consolidated
Comprehensive income $ 152.4
$ 152.4
$ 264.1
$ (32.4 ) $ —
$ (384.1 ) $ 152.4

Condensed Consolidating Statement of Comprehensive Income
Six Months Ended June 30, 2015
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiary
Co-Issuer
Consolidating
Adjustments
Consolidated
Comprehensive income $ 156.6
$ 156.6
$ 253.0
$ 0.2
$ —
$ (409.8 ) $ 156.6

Consolidating Statement of Operations

Six Months Ended June 30, 2017
(in millions)	Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Net sales	$	—	$	—		$	6,577.8		$	741.3		$	—	$	—		$	7,319.1
Cost of sales	—		—			5,505.0			620.5			—		—			6,125.5
Gross profit	—		—			1,072.8			120.8			—		—			1,193.6
Selling and administrative expenses	—		63.9			554.4			92.6			—		—			710.9
Advertising expense	—		—			78.8			3.0			—		—			81.8
Income (loss) from operations	—		(63.9		)	439.6			25.2			—		—			400.9
Interest (expense) income, net	—		(74.5		)	2.1			(3.2		)	—		—			(75.6		)
Net loss on extinguishments of long-term debt	—		(57.4		)	—			—			—		—			(57.4		)
Other income	—		0.1			0.2			1.0			—		—			1.3
Income (loss) before income taxes	—		(195.7		)	441.9			23.0			—		—			269.2
Income tax benefit (expense)	—		86.6			(151.0		)	(6.1		)	—		—			(70.5		)
Income (loss) before equity in earnings of subsidiaries	—		(109.1		)	290.9			16.9			—		—			198.7
Equity in earnings of subsidiaries	198.8		307.8			—			—			—		(506.6		)	—
Net income	$	198.8	$	198.7		$	290.9		$	16.9		$	—	$	(506.6	)	$	198.7

~~CDW CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2016
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries
Co-Issuer
Consolidating
Adjustments
Consolidated
Net cash provided by (used in) operating activities $ —
$ (79.4 ) $ 326.3
$ 45.4
$ —
$ 20.8
$ 313.1
Cash flows from investing activities:
Capital expenditures —
(22.1 ) (1.9 ) (1.7 ) —
—
(25.7 )
Net cash used in investing activities —
(22.1 ) (1.9 ) (1.7 ) —
—
(25.7 )
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility —
105.4
—
—
—
—
105.4
Repayments of borrowings under revolving credit facility —
(105.4 ) —
—
—
—
(105.4 )
Repayments of long-term debt —
(7.7 ) —
(5.7 ) —
—
(13.4 )
Net change in accounts payable-inventory financing —
0.1
70.9
0.3
—
—
71.3
Proceeds from stock option exercises —
3.8
—
—
—
—
3.8
Excess tax benefits from equity-based compensation —
0.7
—
—
—
—
0.7
Proceeds from Coworker Stock Purchase Plan —
4.5
—
—
—
—
4.5
Repurchases of common stock (223.1 ) —
—
—
—
—
(223.1 )
Dividends (35.7 ) —
—
—
—
—
(35.7 )
Other —
—
—
(0.8 ) —
—
(0.8 )
Distributions and advances from (to) affiliates 258.8
136.4
(395.3 ) 3.2
—
(3.1 ) —
Net cash (used in) provided by financing activities —
137.8
(324.4 ) (3.0 ) —
(3.1 ) (192.7 )
Effect of exchange rate changes on cash and cash equivalents —
—
—
(2.9 ) —
—
(2.9 )
Net increase in cash and cash equivalents —
36.3
—
37.8
—
17.7
91.8
Cash and cash equivalents—beginning of period —
45.1
—
31.9
—
(39.4 ) 37.6
Cash and cash equivalents—end of period $ —
$ 81.4
$ —
$ 69.7
$ —
$ (21.7 ) $ 129.4

Table of Contents

CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2015
(in millions)
Parent
Guarantor

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiary
Co-Issuer
Consolidating
Adjustments
Consolidated
Net cash provided by (used in) operating activities $ —
$ (76.4 ) $ 150.1
$ 14.6
$ —
$ 10.8
$ 99.1
Cash flows from investing activities:
Capital expenditures —
(18.4 ) (4.2 ) (0.3 ) —
—
(22.9 )
Premium payments on interest rate cap agreements —
(0.5 ) —
—
—
—
(0.5 )
Net cash used in investing activities —
(18.9 ) (4.2 ) (0.3 ) —
—
(23.4 )
Cash flows from financing activities:
Repayments of long-term debt —
(7.7 ) —
—
—
—
(7.7 )
Proceeds from issuance of long-term debt —
525.0
—
—
—
—
525.0
Payments to extinguish long-term debt —
(525.3 ) —
—
—
—
(525.3 )
Payment of debt financing costs —
(6.8 ) —
—
—
—
(6.8 )
Net change in accounts payable - inventory financing —
—
41.2
—
—
—
41.2
Proceeds from stock option exercises —
1.0
—
—
—
—
1.0
Excess tax benefits from equity-based compensation —
0.2
—
—
—
—
0.2
Repurchases of common stock (91.7 ) —
—
—
—
—
(91.7 )
Proceeds from Coworker Stock Purchase Plan —
4.2
—
—
—
—
4.2
Dividends (23.2 ) —
—
—
—
—
(23.2 )
Distributions and advances from (to) affiliates

114.9
72.2
(187.1 ) —
—
—
—
Net cash (used in) provided by financing activities —
62.8
(145.9 ) —
—
—
(83.1 )
Effect of exchange rate changes on cash and cash equivalents —
—
—
(1.4 ) —
—
(1.4 )
Net (decrease) increase in cash and cash equivalents —
(32.5 ) —
12.9
—
10.8
(8.8 )
Cash and cash equivalents—beginning of period —
346.4
—
24.6
—
(26.5 ) 344.5
Cash and cash equivalents—end of period $ —
$ 313.9
$ —
$ 37.5
$ —
$ (15.7 ) $ 335.7

Consolidating Statement of Operations

Six Months Ended June 30, 2016
(in millions)	Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Net sales	$	—	$	—		$	6,087.9		$	693.4		$	—	$	—		$	6,781.3
Cost of sales	—		—			5,062.8			583.5			—		—			5,646.3
Gross profit	—		—			1,025.1			109.9			—		—			1,135.0
Selling and administrative expenses	—		53.1			531.1			89.8			—		—			674.0
Advertising expense	—		—			73.9			2.6			—		—			76.5
Income (loss) from operations	—		(53.1		)	420.1			17.5			—		—			384.5
Interest (expense) income, net	—		(74.8		)	3.8			(4.0		)	—		—			(75.0		)
Other income	—		—			0.7			1.2			—		—			1.9
Income (loss) before income taxes	—		(127.9		)	424.6			14.7			—		—			311.4
Income tax benefit (expense)	—		48.6			(160.5		)	(4.2		)	—		—			(116.1		)
Income (loss) before equity in earnings of subsidiaries	—		(79.3		)	264.1			10.5			—		—			195.3
Equity in earnings of subsidiaries	195.3		274.6			—			—			—		(469.9		)	—
Net income	$	195.3	$	195.3		$	264.1		$	10.5		$	—	$	(469.9	)	$	195.3

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~(unaudited)~~

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2017
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Co-Issuer		Consolidating Adjustments			Consolidated
Comprehensive income	$	158.7	$	158.7	$	171.2	$	27.2	$	—	$	(357.1	)	$	158.7

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2016
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Comprehensive income	$	82.5	$	82.5	$	153.1	$	(28.9	)	$	—	$	(206.7	)	$	82.5

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2017
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Co-Issuer		Consolidating Adjustments			Consolidated
Comprehensive income	$	222.5	$	222.5	$	290.9	$	42.3	$	—	$	(555.7	)	$	222.5

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2016
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Comprehensive income	$	152.4	$	152.4	$	264.1	$	(32.4	)	$	—	$	(384.1	)	$	152.4

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2017
(in millions)	Parent Guarantor				Subsidiary Issuer				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Co-Issuer			Consolidating Adjustments				Consolidated
Net cash provided by (used in) operating activities	$	—			$	(22.1	)		$	391.5			$	40.7			$	—		$	(33.9	)		$	376.2
Cash flows from investing activities:
Capital expenditures	—				(26.6		)		(4.3		)		(5.9		)		—			—				(36.8		)
Net cash used in investing activities	—				(26.6		)		(4.3		)		(5.9		)		—			—				(36.8		)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility	—				54.0				—				13.7				—			—				67.7
Repayments of borrowings under revolving credit facility	—				—				—				(13.7		)		—			—				(13.7		)
Repayments of long-term debt and revolving loan	—				(7.5		)		—				—				—			—				(7.5		)
Proceeds from the issuance of long-term debt	—				2,083.0				—				—				—			—				2,083.0
Payments to extinguish long-term debt	—				(2,121.3		)		—				—				—			—				(2,121.3		)
Payments of debt financing costs	—				(9.6		)		—				—				—			—				(9.6		)
Net change in accounts payable-inventory financing	—				(1.2		)		(83.9		)		—				—			—				(85.1		)
Proceeds from stock option exercises	—				7.4				—				—				—			—				7.4
Proceeds from Coworker Stock Purchase Plan	—				4.7				—				—				—			—				4.7
Repurchases of common stock	(359.4		)		—				—				—				—			—				(359.4		)
Payment of incentive compensation plan withholding taxes	—				(16.0		)		(24.0		)		(2.0		)		—			—				(42.0		)
Dividends	(50.3		)		—				—				—				—			—				(50.3		)
Principal payments under capital lease obligations	—				—				(0.1		)		(0.5		)		—			—				(0.6		)
Repayment of intercompany loan	—				—				34.3				(34.3		)		—			—				—
Distributions and advances from (to) affiliates	409.7				(100.5		)		(316.6		)		—				—			7.4				—
Net cash (used in) provided by financing activities	—			—	(107.0		)	—	(390.3		)	—	(36.8		)	—	—		—	7.4			—	(526.7		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				2.6				—			—				2.6
Net increase in cash and cash equivalents	—				(155.7		)		(3.1		)		0.6				—			(26.5		)		(184.7		)
Cash and cash equivalents—beginning of period	—				222.7				3.1				37.9				—			—				263.7
Cash and cash equivalents—end of period	$	—			$	67.0			$	—			$	38.5			$	—		$	(26.5	)		$	79.0

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2016
(in millions)	Parent Guarantor			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Co-Issuer		Consolidating Adjustments			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(79.4	)	$	326.3		$	45.4		$	—	$	20.8		$	313.1
Cash flows from investing activities:
Capital expenditures	—			(22.1		)	(1.9		)	(1.7		)	—		—			(25.7		)
Net cash used in investing activities	—			(22.1		)	(1.9		)	(1.7		)	—		—			(25.7		)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility	—			105.4			—			—			—		—			105.4
Repayments of borrowings under revolving credit facility	—			(105.4		)	—			—			—		—			(105.4		)
Repayments of long-term debt	—			(7.7		)	—			(5.7		)	—		—			(13.4		)
Net change in accounts payable - inventory financing	—			0.1			70.9			0.3			—		—			71.3
Proceeds from stock option exercises	—			3.8			—			—			—		—			3.8
Excess tax benefits from equity-based compensation	—			0.7			—			—			—		—			0.7
Proceeds from Coworker Stock Purchase Plan	—			4.5			—			—			—		—			4.5
Repurchases of common stock	(223.1		)	—			—			—			—		—			(223.1		)
Dividends	(35.7		)	—			—			—			—		—			(35.7		)
Principal payments under capital lease obligations	—			—			—			(0.8		)	—		—			(0.8		)
Distributions and advances from (to) affiliates	258.8			136.4			(395.3		)	3.2			—		(3.1		)	—
Net cash (used in) provided by financing activities	—			137.8			(324.4		)	(3.0		)	—		(3.1		)	(192.7		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(2.9		)	—		—			(2.9		)
Net (decrease) increase in cash and cash equivalents	—			36.3			—			37.8			—		17.7			91.8
Cash and cash equivalents—beginning of period	—			45.1			—			31.9			—		(39.4		)	37.6
Cash and cash equivalents—end of period	$	—		$	81.4		$	—		$	69.7		$	—	$	(21.7	)	$	129.4

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CDW CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


~~10.~~13.	Subsequent Events

On August 3, ~~2016,~~2017, the Company announced that its Board of Directors declared a quarterly cash dividend of ~~$0.1075~~$0.16 per common share to be paid on September ~~12, 2016~~11, 2017 to all stockholders of record as of the close of business on August 25, ~~2016.~~2017. Future dividends will be subject to Board of Directors approval.

On August 3, 2017, the Company announced that its Board of Directors authorized a $750 million increase to the Company's share repurchase program under which the Company may repurchase shares of the Company's common stock in the open market or through privately negotiated or other transactions, depending on share price, market conditions and other factors. The increase to the share repurchase program is effective immediately.

The State of Illinois passed its fiscal 2018 budget on July 6, 2017. The changes in the enacted budget include an increase to the corporate income tax rate from 5.25% to 7.00% and the elimination of the business-to-business exemption for unclaimed property. The increase in the Illinois corporate tax rate is not expected to have a material impact on the Company's overall income tax expense for the year. The unclaimed property provisions are effective on January 1, 2018 and are to be applied retroactively for five years. The Company is currently evaluating the impact the retroactive elimination of the business-to-business exemption will have on its Consolidated Financial Statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated or the context otherwise requires, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “we,” “us,” “the Company,” “our,” “CDW” and similar terms refer to CDW Corporation and its subsidiaries. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the unaudited interim Consolidated Financial Statements and the related notes included elsewhere in this report and with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. This discussion contains forward-looking statements that are subject to numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements. See “Forward-Looking Statements” at the end of this discussion.

Overview

CDW Corporation (“Parent”) is a Fortune 500 company with multi-national capabilities and a leading provider of integrated information technology (“IT”) solutions ~~in the United States, Canada and the United Kingdom. With our multinational capabilities, we help our customer base of over 250,000~~to small, medium and large business, government, education and healthcare customers ~~by delivering critical solutions to their increasingly complex IT needs.~~in the United States, Canada and the United Kingdom. Our ~~broad array of~~ offerings ~~ranges~~range from discrete hardware and software products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration.

We are technology “agnostic,” with a product portfolio including more than 100,000 products from more than 1,000 leading and emerging brands. Our solutions are delivered in physical, virtual and cloud-based environments. We provide our products and solutions through ~~more than 5,000~~over 5,500 customer-facing coworkers, including ~~field~~ sellers, highly-skilled technology specialists and advanced service delivery engineers.

We are a leading sales channel partner ~~in the United States, Canada and the United Kingdom~~ for many original equipment manufacturers (“OEMs”), software publishers and ~~software publishers~~cloud providers (collectively, our “vendor partners”), whose products we sell or include in the solutions we offer. We ~~believe we are an important extension of~~provide our vendor ~~partners’ sales and marketing capabilities, providing them~~partners with a cost-effective way to reach customers and deliver a consistent brand experience through our established end-market coverage, technical expertise and extensive customer access.

On August 1, 2015, we completed the acquisition of Kelway TopCo Limited (“Kelway”) by purchasing the remaining 65% of its outstanding common stock which increased our ownership interest from 35% to 100%, and provided us control. On April 4, 2016, Kelway was rebranded CDW UK. Throughout this report, the term “CDW UK” refers to Kelway. CDW UK is a UK-based IT solutions provider which has global supply chain relationships that enable it to conduct business in more than 80 countries. This investment strengthens our ability to provide a more comprehensive solution to our customers and enhances our ability to serve our existing multi-national customers. We included the financial results of CDW UK in our Consolidated Financial Statements from the date of acquisition. For additional information relating to the acquisition, see Note 3 (Acquisition) to the accompanying Consolidated Financial Statements.

We have ~~two~~three reportable ~~segments,~~segments: Corporate, ~~which is comprised~~ primarily ofserving private sector business customers ~~in the US,~~with more than 250 employees, Small Business, primarily serving private sector business customers with up to 250 employees, and Public, which is comprised of government agencies and education and healthcare institutions in the US. Our Corporate segment is divided into a medium/large business customer channel, primarily serving customers with more than 100 employees, and a small business customer channel, primarily serving customers with up to 100 employees.

We also have two other operating segments: CDW Canada and CDW UK, ~~both~~each of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category (“Other”). Effective January 1, ~~2016, CDW Advanced Services is no longer an~~2017, we established Small Business as a separate operating ~~segment. Its results have been allocated to the Corporate~~ and ~~Public segments~~reportable segment to align our financial reporting with the manner in which the Chief Operating Decision Maker assesses performance and makes resource allocation decisions. ~~Segment information reported in prior periods has been reclassified~~By separating Small Business from our Corporate segment we will drive increased focus and accountability for both segments. To achieve our vision to ~~conform~~be small business customers' “first choice for technology,” we are aligning coworkers and digital resources that point directly at this growing market. The Small Business results were previously presented within the Corporate segment as a sales channel and the channel was primarily serving private sector business customers with up to ~~the current period presentation.~~100 employees.

We may sell all or only select products that our vendor partners offer. Each vendor partner agreement provides for specific terms and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also resell software for major software publishers. Our agreements with software publishers allow the end-user customer to acquire software or licensed products and services. In addition to helping our customers determine the best software solutions for their needs, we help them manage their software agreements, including warranties and renewals. A significant portion of our advertising and marketing expenses isare reimbursed through cooperative advertising programs with our vendor partners. These programs are at the discretion of our vendor partners and are typically tied to sales or other commitments to be met by us within a specified period of time.

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Trends and key factors affecting our financial performance

We believe the following trends may have an important impact on our financial performance:

~~Our Public segment sales~~General economic conditions are impacted by government spending policies, budget priorities and revenue levels. An adverse change in any of these factors could cause our Public segment customers to reduce their purchases or to terminate or not renew contracts with us, which could adversely affect our business, results of operations or cash flows. Meeting public safety needs continues to drive our sales growth from our state and local customers and we continue to benefit from the strategic changes made to better align with federal government purchasing programs for our federal customers. Sales growth in our education sales channel continues to benefit from the implementation of projects related to the U.S. Federal Communications Commission E-Rate program and schools developing digital testing and curriculum programs. The Healthcare industry continues to experience consolidation.

~~An important~~a key factor affecting our ability to generate sales and achieve our targeted operating results ~~is the~~as they impact ~~of general economic conditions on~~ our customers’ willingness to spend on information technology. ~~Global economic signals~~This is particularly the case for corporate customers, as their purchases tend to reflect confidence in ~~2016~~their business prospects, which are driven by their perceptions of business conditions. Purchasing behavior may be different between our Corporate customers and Small Business customers due to their perceptions of business conditions.

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Changes in spending policies, budget priorities and revenue levels are a key factor influencing government purchasing levels. Our Government results also reflect increased interest in meeting public safety needs through technology solutions by state and local customers, as well as our ability to address strategic changes made by the Federal government toward a more programmatic technology strategy.

Customer focus on security has been, and we expect will continue to be, ~~mixed. For example, there~~an ongoing trend. Customers are seeking solutions to protect their internal systems against threats and are implementing solutions that provide enterprise-wide visibility, detection expertise and investigation workflows. They are also implementing endpoint security, firewall segmentation and user authentication tools.

The Healthcare industry continues to experience uncertainty given recent legislative action and concerns related to funding and many customers put purchase decisions on hold pending more clarity.

Our Education sales channel performance continues to benefit from school adoption of digital testing and curriculum programs and creation of new learning environments for students. It has also been affected by the implementation of networking projects related to the US Federal Communications Commission E-Rate program. Within the higher education market, networking projects continue to be a key priority across campuses. While technology is an opportunity to create cost savings and improve productivity, funding is a key determinant of technology spending in education.

There continues to be substantial uncertainty regarding the impact of ~~the Referendum of the United Kingdom’s (“UK”) Membership of the European Union (“EU”) (referred to as “Brexit”), advising for the exit of the UK from the EU.~~Brexit. Potential adverse consequences of Brexit such as global market uncertainty, volatility in currency exchange rates, greater restrictions on imports and exports between UK and EU countries and increased regulatory complexities could have a negative impact on our business, financial condition and results of operations. To date, CDW UK is not seeing significant changes in the buying behavior of its customers even with the uncertainty related to timing and terms of Brexit.

Technology trends drive customer purchase behaviors and we are seeing continuing evolution in the market. Innovation influences customer purchases across all of our customer end-markets. Key trends in technology include increasing adoption of cloud-based solutions for certain key workloads, including backup and recovery, collaboration and security, as well as adoption of hyper-converged appliances to deliver greater flexibility and efficiency. In addition, uncertainties related to potential changes in tax and regulatory policy, potential interest rate increases, weakening consumer and business confidence or increased unemployment could result in reduced or deferred spending on information technology products and services by our customers and result in increased competitive pricing pressures. We continue to closely monitor macroeconomic conditions and adjust our operational plans, including hiring plans, appropriately.

~~We believe that our customers’ transition to more complex technology~~hybrid IT solutions will continue to be an important growth area for us in the future. However, because the market for technology products and services is highly competitive, our success at capitalizing on this transition will be based on our ability to tailor specific solutions to customer needs, the quality and breadth of our product and service offerings, the knowledge and expertise of our sales force, price, product availability and speed of delivery.are being adopted, along with software being embedded into solutions.

Key business metrics

~~Our management monitors~~We monitor a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business and make adjustments as necessary. We believe that the most important of these measures and ratios include ~~Net income,~~ average daily sales, gross margin, operating margin, Net income, Non-GAAP net income, Net income per common share, Non-GAAP net income per diluted share, EBITDA and Adjusted EBITDA, free cash flow, return on invested capital, ~~cash~~Cash and cash equivalents, net working capital, cash conversion cycle (defined to be days of sales outstanding in ~~accounts~~Accounts receivable plus days of supply in ~~inventory~~Inventory minus days of purchases outstanding in ~~accounts~~Accounts payable, including both trade and inventory-financing, based on a rolling three-month average), debt levels including available credit and leverage ratios, sales per coworker and coworker turnover. These measures and ratios are compared to standards or objectives set by management, so that actions can be taken, as necessary, in order to achieve the standards and objectives.

In this Form 10-Q, we discuss Non-GAAP net income, EBITDA and Adjusted EBITDA and consolidated Net sales growth on a constant currency basis, which are ~~considered~~ non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position 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 management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

We believe these measures provide analysts, investors and management with helpful information regarding the underlying operating performance of our business, as they remove the impact of items that management believes are not reflective of underlying operating performance. Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. Additionally, Adjusted EBITDA is a measure in the credit agreement governing our Senior Secured Term Loan Facility (“Term Loan”) used to evaluate 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 Long-Term Debt and Financing Arrangements within Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 56 (Long-Term Debt) to the accompanying Consolidated Financial Statements. For the definitions of Non-GAAP net income, ~~and~~ Adjusted EBITDA and consolidated Net sales growth on a constant currency basis and reconciliations to Net income, see “Results of Operations”.

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The results of certain of our key business metrics are as follows:


	Three Months Ended June 30,				Three Months Ended June 30,
(dollars in millions)	2016		2015		2017		2016
Net sales	$	3,664.6	$	3,314.0	$	3,994.4	$	3,664.6
Gross profit	610.5		534.5		641.1		610.5
Income from operations	223.5		205.9		231.1		223.5
Net income	117.5		108.2		141.0		117.5
Non-GAAP net income	155.6		139.0		163.2		155.6
Adjusted EBITDA	300.6		268.0		314.7		300.6
Average daily sales	57.3		51.8		62.4		57.3
Net debt (defined as total debt minus cash and cash equivalents) ⁽¹⁾	3,111.1		2,841.8
Net debt ⁽¹⁾					3,217.3		3,111.1
Cash conversion cycle (in days) ⁽²⁾	17		19		16		17

(1)

~~As a result of~~Defined as total debt minus cash and cash equivalents; $3,296 million minus $79 million for the adoption of Accounting Standards Update (ASU) 2015-15 which allows companies to present deferred financing costs for line-of-credit arrangements as an asset, we retrospectively adjusted the deferred financing costs and long-term debt liability presented in thethree months ended June 30, ~~2015 Consolidated Balance Sheet to align it to~~2017 and $3,240 million minus $129 million for the ~~current period presentation.~~three months ended June 30, 2016.


(2)	Cash conversion cycle is defined as days of sales outstanding in ~~accounts~~Accounts receivable and certain receivables due from vendors plus days of supply in inventory minus days of purchases outstanding in ~~accounts~~Accounts payable and Accounts payable-inventory financing, based on a rolling three-month average.

Results of Operations

Three Months Ended June 30, ~~2016~~2017 Compared to Three Months Ended June 30, ~~2015~~2016

Results of operations, in dollars and as a percentage of Net sales ~~for the three months ended June 30, 2016 and 2015~~ are as follows:


	Three Months Ended June 30,										Three Months Ended June 30,
	2016					2015					2017					2016
	Dollars in Millions			Percentage of Net Sales		Dollars in Millions			Percentage of Net Sales		Dollars in Millions			Percentage of Net Sales		Dollars in Millions			Percentage of Net Sales
Net sales	$	3,664.6		100.0	%	$	3,314.0		100.0	%	$	3,994.4		100.0	%	$	3,664.6		100.0	%
Cost of sales	3,054.1			83.3		2,779.5			83.9		3,353.3			84.0		3,054.1			83.3
Gross profit	610.5			16.7		534.5			16.1		641.1			16.1		610.5			16.7
Selling and administrative expenses	344.7			9.4		290.6			8.8		363.5			9.1		344.7			9.4
Advertising expense	42.3			1.2		38.0			1.1		46.5			1.2		42.3			1.2
Income from operations	223.5			6.1		205.9			6.2		231.1			5.7		223.5			6.1
Interest expense, net	(36.9		)	(1.0	)	(37.8		)	(1.1	)	(35.9		)	(0.9	)	(36.9		)	(1.0	)
Other income, net	0.9			—		4.0			0.1
Other income											0.3			—		0.9			—
Income before income taxes	187.5			5.1		172.1			5.2		195.5			4.8		187.5			5.1
Income tax expense	(70.0		)	(1.9	)	(63.9		)	(1.9	)	(54.5		)	(1.4	)	(70.0		)	(1.9	)
Net income	$	117.5		3.2	%	$	108.2		3.3	%	$	141.0		3.4	%	$	117.5		3.2	%

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Net sales

Net sales by segment, in dollars and as a percentage of total Net sales, and the year-over-year dollar and percentage change in Net sales ~~for the three months ended June 30, 2016 and 2015~~ are as follows:


	Three Months Ended June 30,															Three Months Ended June 30,
	2016				2015											2017				2016
(dollars in millions)	Net Sales		Percentage of Total Net Sales		Net Sales⁽¹⁾		Percentage of Total Net Sales		Dollar Change			Percent Change⁽²⁾		Average Daily Sales Percent Change⁽²⁾		Net Sales		Percentage of Total Net Sales		Net Sales⁽¹⁾		Percentage of Total Net Sales		Dollar Change			Percent Change⁽²⁾
Corporate:
Medium / Large	$	1,489.0	40.6	%	$	1,521.3	45.9	%	$	(32.3	)	(2.1	)%	(2.1	)%
Corporate																$	1,630.7	40.8	%	$	1,490.8	40.6	%	$	139.9		9.4	%

Small Business	290.2		7.9		277.3		8.4		12.9			4.7		4.7		321.5		8.1		288.4		7.9		33.1			11.5
Total Corporate	1,779.2		48.6		1,798.6		54.3		(19.4		)	(1.1	)	(1.1	)

Public:
Government	456.6		12.5		390.8		11.8		65.8			16.8		16.8		543.9		13.6		456.6		12.5		87.3			19.1
Education	640.0		17.5		548.9		16.6		91.1			16.6		16.6		712.9		17.9		640.0		17.5		72.9			11.4
Healthcare	450.4		12.3		448.8		13.5		1.6			0.3		0.3		417.3		10.4		450.4		12.3		(33.1		)	(7.3	)
Total Public	1,547.0		42.2		1,388.5		41.9		158.5			11.4		11.4		1,674.1		41.9		1,547.0		42.2		127.1			8.2

Other	338.4		9.2		126.9		3.8		211.5			166.8		166.8		368.1		9.2		338.4		9.2		29.7			8.8

Total net sales	$	3,664.6	100.0	%	$	3,314.0	100.0	%	$	350.6		10.6	%	10.6	%	$	3,994.4	100.0	%	$	3,664.6	100.0	%	$	329.8		9.0	%


(1)	Effective January 1, ~~2016, CDW Advanced Services~~2017, Small Business is ~~included in our~~now an operating and reportable segment. Its results were previously presented as a sales channel within the Corporate ~~and Public segments and Other is comprised of CDW Canada and CDW UK.~~segment. Prior periods have been reclassified to conform to the current period presentation.


(2)	There were 64 selling days for both the three months ended June 30, ~~2016~~2017 and ~~2015.~~2016.

Total Net sales for the three months ended June 30, ~~2016~~2017 increased ~~$351~~$330 million, or ~~10.6%~~9.0%, to ~~$3,665~~$3,994 million, compared to ~~$3,314~~$3,665 million for the three months ended June 30, ~~2015. This increase reflects both organic net~~2016. Net sales ~~growth and the impact of consolidating three months of CDW UK net sales.~~

~~Organic net sales,~~on a constant currency basis, which excludes the impact of currency translation, for the ~~acquisition of CDW UK,~~three months ended June 30, 2017 increased ~~$143~~$357 million, or ~~4.3%~~9.8%, to ~~$3,457~~$3,994 million, compared to $3,637 million for the three months ended June 30, ~~2016, compared to $3,314 million~~2016. See “Non-GAAP Financial Measure Reconciliations” below for additional information.

For the three months ended June 30, ~~2015. For additional information, see "Non-GAAP Financial Measure Reconciliations" below. On an organic basis, transactional product~~2017, sales grew faster than our solution-focused products. Growth in transactional products was led by notebooks/mobile devices due to continued innovation in new form factors and a new vendor partner. Solutions-focused growth acceleration was driven by ~~software, reflecting strong~~gains in all of our customer-facing end markets except healthcare, which saw a Net sales decline. Market trends remained similar to those in the first quarter of 2017, with accelerated hardware sales and ongoing focus on optimization and efficiency, security and ~~applications suites growth.~~integration of software into solutions. These trends drove significant growth in several categories, including double-digit growth in client devices, networking and software.

Corporate segment ~~net~~Net sales for the three months ended June 30, ~~2016 decreased $19~~2017 increased $140 million, or ~~1.1%~~9.4%, compared to the three months ended June 30, ~~2015. This decrease is~~2016. Growth was primarily driven by ~~a decline~~customer refresh of client devices, networking and software. Momentum that began in ~~our medium/large customer channel, partially offset by growth~~the first quarter continued to build with more projects moving from our small business customers, particularly in transactional product sales. Within our Corporate segment, net sales to medium/large customers decreased $32 million, or 2.1%, between periods, primarily duethe back-burner to the ~~impact of economic volatility which caused many customers to put longer tail projects on hold~~front, with increases in both transactional items, including notebooks and ~~to extend decision cycles. The decline in net sales was partially offset by growth in transactional products.~~desktops, and solutions, including networking communication and servers.

Small Business segment Net ~~sales to small business customers increased by $13 million, or 4.7%, between periods, driven by growth in notebook/mobile devices.~~

~~Public segment net~~ sales for the three months ended June 30, ~~2016~~2017 increased ~~$159~~by $33 million, or ~~11.4%~~11.5%, between periods, as customer confidence remained strong. Sales growth was primarily driven by transactional products such as notebooks and mobile devices.

Public segment Net sales for the three months ended June 30, 2017 increased $127 million, or 8.2%, compared to the three months ended June 30, ~~2015,~~2016, with balanced growth between solutions and transactional ~~products.~~sales. The ~~increase~~growth was fueled by double-digit increases in both Government and Education customers. Strong Net sales to our State and Local government customers was driven by ~~growth in both our government and education customer channels. A~~a continued focus on public safety and ~~the addition of~~ new ~~contracts drove the strong increase in net sales to state and local government customers.~~contracts. Net sales to ~~federal government~~Federal Government customers ~~grew modestly compared~~included a partial shipment of a 2016 client device order than had been delayed into 2017, as well as customers continuing to ~~the prior year's strong~~spend existing budgets on planned projects and ongoing successful alignment with strategic programs. Education results ~~as we continued to benefit from the strategic changes made to better align with federal government purchasing programs for our federal customers. Net sales to education customers~~reflected increased ~~$91 million, or 16.6%, between periods, which reflected balanced sales~~ growth from ~~both our K-12 and higher education customers.~~

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~~Growth in our~~both Higher Education and K-12 ~~customer channel~~customers. K-12 growth was led by ~~increases in notebooks/~~transactional products, particularly notebooks and mobile devices, desktops and ~~netcomm products,~~audio/video equipment, as ~~a result of the implementation of projects related~~schools continued to ~~the U.S. Federal Communications Commission E-Rate program and schools developing~~develop digital testing and curriculum ~~programs. Additionally, we began~~programs and implement collaborative learning environments. Sales to ~~see the benefit from programs pointed at select~~our Higher Education customers grew double-digits driven by networking and software as institutions ~~in our higher education channel.~~continue to enhance their infrastructure to meet expanding wireless needs. Net sales to ~~healthcare~~Healthcare customers remained relatively flat at $450 million for the three months ended June 30, 2016, compared to $449 million for the comparable period, reflecting the continuing impact of consolidation in the healthcare industry.decreased 7.3% between periods as many customers put purchase decisions on hold awaiting more definitive legislative direction on funding and reimbursements.

Net sales in Other for the three months ended June 30, ~~2016~~2017 increased ~~$212~~$30 million, or ~~166.8%~~8.8%, compared to the three months ended June 30, ~~2015.~~2016. Other is comprised of results from our Canadian and UK operations. Both operations had strong growth in local currency, with CDW Canada growing high single digits and CDW ~~UK.~~UK growing double digits. The ~~increase in net sales was driven by the~~ impact of ~~consolidating three months of CDW~~currency reduced both Canada and UK ~~net sales, combined with a low single digit increase in the net sales from CDW Canada, which was impacted by unfavorable foreign currency translation. CDW Canada experienced high single-digit~~ sales growth in ~~local currency.~~US dollars by approximately 50 percent each.

Gross profit

Gross profit increased ~~$76~~$31 million, or ~~14.2%~~5.0%, to $641 million for the three months ended June 30, 2017, compared to $611 million for the three months ended June 30, ~~2016, compared to $535 million for the three months ended June 30, 2015.~~2016. As a percentage of Net sales, Gross profit ~~increased~~decreased 60 basis points to 16.1% for the three months ended June 30, 2017, down from 16.7% for the three months ended June 30, ~~2016, up from 16.1% for the three months ended June 30, 2015.~~

~~Our continuing mix into net service contract revenue, including items such as third-party services, warranties, and Software~~2016. The decline was driven by an 80 basis points reduction due to product margin as a ~~Service (“SaaS”), contributed a positive impact~~result of ~~30 basis points to gross profit margin as our cost paid to the vendor or third-party service provider is recorded as a reduction to net~~increased hardware sales ~~resulting in net sales being equal to the gross profit on the transaction. We experienced~~and an ongoing competitive marketplace. This was partially offset by a favorable impact of 20 basis points principally from vendor partner funding ~~which includes purchase discounts, volume rebates~~ and ~~cooperative advertising, and 10 basis points from the inclusion of CDW UK, which has a higher mix of services.~~net service contract revenue.

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 revenue, commission revenue, pricing strategies, market conditions and other factors.

Selling and administrative expenses

Selling and administrative expenses increased ~~$54~~$19 million, or ~~18.6%~~5.5%, to $364 million for the three months ended June 30, 2017, compared to $345 million for the three months ended June 30, ~~2016, compared to $291 million for the three months ended June 30, 2015.~~2016. As a percentage of total Net sales, Selling and administrative expenses ~~increased 60~~decreased by 30 basis points to 9.1% in the second quarter of 2017, down from 9.4% in the second quarter of ~~2016, up from 8.8% in the second quarter of 2015.~~2016. Sales payroll costs increased ~~$33~~$5 million, or ~~18.2%~~3.1%, between ~~quarters, primarily due to incremental coworkers hired since the second quarter of 2015, higher costs~~periods consistent with ~~increased sales and~~ Gross ~~profit and the inclusion of CDW UK coworker costs.~~Profit growth. Total coworker count was ~~8,712,~~8,787, up ~~1,434~~75 from ~~7,278~~8,712 at June 30, ~~2015.~~2016. Total coworker count was ~~8,465~~8,516 at December 31, ~~2015. Amortization~~2016. Equity-based compensation expense ~~related to intangibles~~and the associated taxes increased $8$5 million, or ~~17.4%~~52.1%, during the three months ended June 30, ~~2016,~~2017, compared to the prior year period, primarily due to ~~incremental intangible asset amortization expense arising from our acquisition~~the impact of ~~CDW UK. Non-cash equity-based compensation expense increased $2 million, or 29.5%, during the three months ended June 30, 2016, compared to the prior year period, primarily due to~~ annual equity awards granted under our ~~2013~~ Long-Term Incentive Plan ~~in 2016~~ and due to the vesting of an equity ~~awards granted in connection with~~grant made at the time of our ~~acquisition of CDW UK.~~initial public offering and the related payroll taxes.

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Income from operations

Income from operations by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change ~~for the three months ended June 30, 2016 and 2015 is~~are as follows:


	Three Months Ended June 30,												Three Months Ended June 30,
	2016					2015							2017					2016
	Dollars in Millions			Operating Margin Percentage		Dollars in Millions			Operating Margin Percentage		Percent Change in Income (Loss) from Operations		Dollars in Millions			Operating Margin Percentage		Dollars in Millions			Operating Margin Percentage		Percent Change in Income from Operations
Segments:⁽¹⁾
Corporate⁽²⁾	$	135.2		7.6	%	138.8			7.7	%	(2.6	)%	$	127.1		7.8	%	$	117.5		7.9	%	8.1	%
Public⁽²⁾	108.3			7.0		91.0			6.6		18.9
Other⁽³⁾⁽⁴⁾	9.4			2.8		4.3			3.4		118.8
Headquarters⁽⁵⁾	(29.4		)	nm*		(28.2		)	nm*		3.9
Small Business⁽²⁾													19.3			6.0		17.7			6.1		9.6
Public													104.5			6.2		108.3			7.0		(3.7	)
Other⁽³⁾													12.6			3.4		9.4			2.8		33.8
Headquarters⁽⁴⁾													(32.4		)	—		(29.4		)	—		10.6
Total income from operations	$	223.5		6.1	%	$	205.9		6.2	%	8.6	%	$	231.1		5.8	%	$	223.5		6.1	%	3.4	%

* Not meaningful


(1)	Segment income from operations includes the segment’s direct operating income, allocations for Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.


(2)	~~Certain costs related to technology specialists have been reclassified between our Corporate~~Effective January 1, 2017, Small Business is its own operating and ~~Public segments.~~reportable segment. The prior period has been reclassified to conform to the current period presentation.


(3)	Effective January 1, 2016, CDW Advanced Services is included in our Corporate and Public segments and Other is comprised of CDW Canada and CDW UK. The prior period has been reclassified to conform to the current period presentation.


~~(4)~~	Includes the financial results for our other operating segments, CDW Canada and CDW UK, which do not meet the reportable segment quantitative thresholds.


~~(5)~~(4)	Includes certain Headquarters’ function costs that are not allocated to the segments. ~~Certain Headquarters expenses have been allocated to CDW Canada in 2016. The prior period has been reclassified to conform to the current period presentation.~~

Income from operations was $231 million for the three months ended June 30, 2017, an increase of $7 million, or 3.4%, compared to $224 million for the three months ended June 30, ~~2016, an increase of $18 million, or 8.6%, compared~~2016. Total operating margin percentage decreased 30 basis points to ~~$206 million~~5.8% for the three months ended June 30, ~~2015. Total operating margin percentage decreased 10 basis points to~~2017, from 6.1% for the three months ended June 30, ~~2016, from 6.2% for the three months ended June 30, 2015.~~2016. Operating margin percentage was ~~negatively~~ impacted by increased hardware sales and an ~~increase~~ongoing competitive marketplace, partially offset by a decrease in Selling and administrative expenses as a percentage of Net ~~sales, primarily due to incremental coworkers hired since the second quarter of 2015, higher costs consistent with increased sales and Gross profit and the inclusion of CDW UK coworker costs.~~sales.

Corporate segment income from operations was ~~$135~~$127 million for the three months ended June 30, ~~2016, a decrease~~2017, an increase of $4$9 million, or ~~2.6%~~8.1%, compared to ~~$139~~$118 million for the three months ended June 30, ~~2015.~~2016. Corporate segment operating margin percentage decreased 10 basis points to ~~7.6%~~7.8% for the three months ended June 30, ~~2016,~~2017, from ~~7.7%~~7.9% for the three months ended June 30, ~~2015.~~2016. This decrease was primarily due to increased hardware sales and an ~~increase in selling~~ongoing competitive marketplace, which was partially offset by lower Selling and administrative expenses as a percentage of Net ~~sales,~~sales.

Small Business segment income from operations was $19 million for the three months ended June 30, 2017, an increase of $1 million, or 9.6%, compared to $18 million for the three months ended June 30, 2016. Small Business segment operating margin percentage decreased 10 basis points to 6.0% for the three months ended June 30, 2017, from 6.1% for the three months ended June 30, 2016. This decline was primarily due to ~~higher costs related to incremental coworkers hired since the second quarter~~increased hardware sales and an ongoing competitive marketplace, which was partially offset by lower Selling and administrative expenses as a percentage of ~~2015.~~Net sales.

Public segment income from operations was $105 million for the three months ended June 30, 2017, a decrease of $3 million, or 3.7%, compared to $108 million for the three months ended June 30, ~~2016,~~2016. Public segment operating margin percentage decreased 80 basis points to 6.2% for the three months ended June 30, 2017, from 7.0% for the three months ended June 30, 2016. The decrease in operating margin percentage was primarily driven by increased hardware sales, an ~~increase of $17 million, or 18.9%, compared to $91~~ongoing competitive marketplace and performance in Healthcare.

Other income from operations was $13 million for the three months ended June 30, ~~2015. Public segment operating margin percentage was 7.0% and 6.6% for the three months ended June 30, 2016 and 2015, respectively. The 40 basis point~~2017, an increase ~~in operating margin percentage was driven by a higher mix~~ of ~~net service contract revenue.~~

~~Other income from operations was~~$4 million, or 33.8%, compared to $9 million for the three months ended June 30, ~~2016, an increase~~2016. Other operating margin percentage increased 60 basis points to 3.4% for the three months ended June 30, 2017, from 2.8% for the three months ended June 30, 2016. Operating margin percentage was primarily driven by lower intangible amortization expense as a percentage of ~~$5 million, or 118.8%, compared to $4~~Net sales.

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Income tax expense

Income tax expense was $55 million for the three months ended June 30, 2015. This was primarily due to the inclusion of CDW UK income from operations. Other operating margin percentage decreased 60 basis points to 2.8% for the three months ended June 30, 2016, from 3.4% for the three months ended June 30, 2015. This decrease was primarily due to an increase in selling and administrative expenses as a percentage of Net sales, driven by higher intangibles amortization expense from our acquisition of CDW UK.

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~~Income tax expense~~

~~Income tax expense was $70 million for the three months ended June 30, 2016,~~2017, compared to ~~$64~~$70 million for the same period of the prior year. The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was ~~37.3%~~27.9% for the three months ended June 30, ~~2016, compared~~2017 and differed from the US federal statutory rate primarily due to ~~37.1%~~$19 million of excess tax benefits on equity compensation. The effective tax rate for the same period of the prior year was 37.3% and differed ~~in both periods~~ from the US federal statutory rate primarily due to state and local income taxes. The lower effective tax rate for the three months ended June 30, 2017 as compared to the same period of the prior year was primarily attributable to $19 million of excess tax benefits on equity compensation.

Non-GAAP Financial Measure Reconciliations

We have included reconciliations of Non-GAAP net income, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin ~~Organic net sales growth~~ and ~~Organic net~~consolidated Net sales growth on a constant currency basis for the three months ended June 30, ~~2016~~2017 and ~~2015~~2016 below.

Non-GAAP net income excludes, among other things, charges related to the amortization of acquisition-related intangible assets, equity-based compensation and associated taxes, 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. 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. Organic net sales growthAdjusted EBITDA margin is defined as ~~net sales growth excluding the impact~~Adjusted EBITDA as a percentage of ~~acquisitions within the last twelve months. Organic net~~Net sales. Consolidated Net sales growth on a constant currency basis is defined as ~~organic net~~consolidated 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, ~~Non-GAAP net income, Organic net~~Adjusted EBITDA margin and consolidated Net sales ~~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 or financial position 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 management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

We believe these measures provide analysts, investors and management with helpful information regarding the underlying operating performance of our business, as they remove the impact of items that management believes are not reflective of underlying operating performance. Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. Additionally, Adjusted EBITDA is a measure in the credit agreement governing our Senior Secured Term Loan Facility (“Term Loan”) used to evaluate 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 56 (Long-Term Debt) to the accompanying Consolidated Financial Statements.

Non-GAAP net income

Non-GAAP net income was $163 million for the three months ended June 30, 2017, an increase of $7 million, or 4.9%, compared to $156 million for the three months ended June 30, ~~2016, an increase of $17 million, or 11.9%, compared to $139 million for the three months ended June 30, 2015.~~2016.


	Three Months Ended June 30,						Three Months Ended June 30,
(in millions)	2016			2015			2017			2016
Net income	$	117.5		$	108.2		$	141.0		$	117.5
Amortization of intangibles⁽¹⁾	47.1			40.2			46.3			47.1
Non-cash equity-based compensation	9.7			7.5
Acquisition and integration expenses⁽²⁾	2.2			1.4
Equity-based compensation							11.5			9.7
Integration expenses⁽²⁾							2.0			2.2
Other adjustments(3)	0.3			1.0			3.7			0.3
Aggregate adjustment for income taxes⁽³⁾⁽⁴⁾	(21.2		)	(19.3		)	(41.3		)	(21.2		)
Non-GAAP net income⁽⁴⁾	$	155.6		$	139.0		$	163.2		$	155.6


(1)	Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.


(2)	~~Comprises~~Comprised of expenses related to CDW UK.

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(3)	Primarily includes expenses related to payroll taxes on equity-based compensation during the three months ended June 30, 2017 and 2016.


(4)	Aggregate adjustment for income taxes consists of the following:



	Three Months Ended June 30,
	2017			2016
Total Non-GAAP adjustments	$	63.4		$	59.3
Weighted-average statutory effective rate	36.0		%	36.0		%
Income tax	(22.8		)	(21.3		)
Excess tax benefits from equity-based compensation	(18.6		)	—
Non-deductible adjustments and other	0.1			0.1
Total aggregate adjustment for income taxes	$	(41.3	)	$	(21.2	)

Adjusted EBITDA

Adjusted EBITDA was $315 million for the three months ended June 30, 2017, an increase of $14 million, or 4.7%, compared to $301 million for the three months ended June 30, 2016. As a percentage of Net sales, Adjusted EBITDA was 7.9% for the three months ended June 30, 2017 and 8.2% for the three months ended June 30, 2016.



	Three Months Ended June 30,
(in millions)	2017			Percentage of Net Sales		2016			Percentage of Net Sales
Net income	$	141.0				$	117.5
Depreciation and amortization	65.4					63.7
Income tax expense	54.5					70.0
Interest expense, net	35.9					36.9
EBITDA	296.8			7.4	%	288.1			7.9%

Adjustments:
Equity-based compensation	11.5					9.7
Income from equity investments⁽¹⁾	(0.1		)			(0.1		)
Integration expenses⁽²⁾	2.0					2.2
Other adjustments⁽³⁾	4.5					0.7
Total adjustments	17.9					12.5
Adjusted EBITDA	$	314.7		7.9	%	$	300.6		8.2%


(1)	Represents our share of net income/loss from our equity investments.


(2)	Comprised of expenses related to CDW UK.


(3)	~~Based~~Primarily includes expenses related to payroll taxes 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.

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~~(4)~~	~~Includes the impact of consolidating CDW UK's financial results for~~equity-based compensation during the three months ended June 30, 2017 and 2016.

~~Adjusted EBITDA~~Consolidated net sales growth on constant currency basis

~~Adjusted EBITDA was $301~~Consolidated Net sales increased $330 million, or 9.0%, to $3,994 million for the three months ended June 30, ~~2016, an increase of $33 million, or 12.2%,~~2017, compared to ~~$268~~$3,665 million for the three months ended June 30, ~~2015. As a percentage of~~2016. Consolidated Net ~~sales, Adjusted EBITDA was 8.2% for the three months ended June 30, 2016 compared to 8.1% for the three months ended June 30, 2015.~~

Three Months Ended June 30,
(in millions) 2016 Percentage of Net Sales 2015 Percentage of Net Sales
Net income $ 117.5
$ 108.2

Depreciation and amortization 63.7
52.6

Income tax expense 70.0
63.9

Interest expense, net 36.9
37.8

EBITDA 288.1
7.9 % 262.5
7.9%

Adjustments:
Non-cash equity-based compensation 9.7
7.5

Income from equity investments (0.1 ) (4.0 )
Acquisition and integration expenses⁽¹⁾
2.2
1.4

Other adjustments⁽²⁾
0.7
0.6

Total adjustments 12.5
5.5

Adjusted EBITDA⁽³⁾
$ 300.6
8.2 % $ 268.0
8.1%


~~(1)~~	~~Comprises expenses related to CDW UK.~~


~~(2)~~	~~Primarily includes historical retention costs.~~


~~(3)~~	~~Includes the impact of consolidating CDW UK's financial results for the three months ended June 30, 2016.~~

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~~Organic net sales growth and organic net sales growth on constant currency basis~~

Organic net sales, which excludes the impact of the acquisition of CDW UK, increased $143 million, or 4.3%, to $3,457 million for the three months ended June 30, 2016, compared to $3,314 million for the three months ended June 30, 2015. Organic net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased ~~$149~~$357 million, or ~~4.5%~~9.8%, to ~~$3,457~~$3,994 million for the three months ended June 30, ~~2016,~~2017, compared to ~~$3,308~~$3,637 million for the three months ended June 30, ~~2015.~~2016.

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Three Months Ended June 30,
(in millions) 2016 2015 % Change
Average Daily % Change⁽¹⁾
Net sales, as reported $ 3,664.6
$ 3,314.0
10.6 % 10.6 %
Impact of acquisition⁽²⁾
(208.0 ) —

Organic net sales $ 3,456.6
$ 3,314.0
4.3 % 4.3 %
Foreign currency translation⁽³⁾
—
(5.8 )
Organic net sales, on a constant currency basis $ 3,456.6
$ 3,308.2
4.5 % 4.5 %



	Three Months Ended June 30,
(in millions)	2017		2016			% Change		Average Daily % Change⁽¹⁾
Consolidated Net sales, as reported	$	3,994.4	$	3,664.6		9.0	%	9.0	%
Foreign currency translation⁽²⁾	—		(27.6		)
Consolidated Net sales, on a constant currency basis	$	3,994.4	$	3,637.0		9.8	%	9.8	%


(1)	There were 64 selling days for both the three months ended June 30, ~~2016~~2017 and ~~2015.~~2016.


(2)	~~Represents CDW UK's financial results for the three months ended June 30, 2016.~~


~~(3)~~	Represents the effect of translating the prior year results of CDW Canada and CDW UK's results at the average exchange rates applicable in the current year.

Six Months Overview

The results of certain of our key business metrics are as follows:



	Six Months Ended June 30,
(dollars in millions)	2017		2016
Net sales	$	7,319.1	$	6,781.3
Gross profit	1,193.6		1,135.0
Income from operations	400.9		384.5
Net income	198.7		195.3
Non-GAAP net income	284.5		268.3
Adjusted EBITDA	563.9		533.3
Average daily sales	57.2		53.0
Net debt ⁽¹⁾	3,217.3		3,111.1
Cash conversion cycle (in days) ⁽²⁾	16		17


(1)	Defined as total debt minus cash and cash equivalents; $3,296 million minus $79 million for the six months ended June 30, 2017 and $3,240 million minus $129 million for the six months ended June 30, 2016.


(2)	Cash conversion cycle is defined as days of sales outstanding in Accounts receivable and certain receivables due from vendors plus days of supply in inventory minus days of purchases outstanding in Accounts payable and Accounts payable-inventory financing, based on a rolling three-month average.

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Results of Operations

Six Months Ended June 30, ~~2016~~2017 Compared to Six Months Ended June 30, ~~2015~~2016

Results of operations, in dollars and as a percentage of Net sales ~~for the six months ended June 30, 2016 and 2015~~ are as follows:


											Six Months Ended June 30,
	Six Months Ended June 30, 2016					Six Months Ended June 30, 2015					2017					2016
	Dollars in Millions			Percentage of Net Sales		Dollars in Millions			Percentage of Net Sales		Dollars in Millions			Percentage of Net Sales		Dollars in Millions			Percentage of Net Sales
Net sales	$	6,781.3		100.0	%	$	6,069.2		100.0	%	$	7,319.1		100.0	%	$	6,781.3		100.0	%
Cost of sales	5,646.3			83.3		5,078.2			83.7		6,125.5			83.7		5,646.3			83.3
Gross profit	1,135.0			16.7		991.0			16.3		1,193.6			16.3		1,135.0			16.7
Selling and administrative expenses	674.0			9.9		566.1			9.3		710.9			9.7		674.0			9.9
Advertising expense	76.5			1.1		67.4			1.1		81.8			1.1		76.5			1.1
Income from operations	384.5			5.7		357.5			5.9		400.9			5.5		384.5			5.7
Interest expense, net	(75.0		)	(1.1	)	(82.6		)	(1.4	)	(75.6		)	(1.0	)	(75.0		)	(1.1	)
Net loss on extinguishments of long-term debt	—			—		(24.3		)	(0.4	)	(57.4		)	(0.8	)	—			—
Other income, net	1.9			—		8.5			0.1
Other income											1.3			—		1.9			—
Income before income taxes	311.4			4.6		259.1			4.3		269.2			3.7		311.4			4.6
Income tax expense	(116.1		)	(1.7	)	(96.2		)	(1.6	)	(70.5		)	(1.0	)	(116.1		)	(1.7	)
Net income	$	195.3		2.9	%	$	162.9		2.7	%	$	198.7		2.7	%	$	195.3		2.9	%

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Net sales

Net sales by segment, in dollars and as a percentage of total Net sales, and the year-over-year dollar and percentage change in Net sales ~~for the six months ended June 30, 2016 and 2015~~ are as follows:


	Six Months Ended June 30,														Six Months Ended June 30,
	2016				2015										2017				2016
(dollars in millions)	Net Sales		Percentage of Total Net Sales		Net Sales⁽¹⁾		Percentage of Total Net Sales		Dollar Change		Percent Change⁽²⁾		Average Daily Sales Percent Change⁽²⁾		Net Sales		Percentage of Total Net Sales		Net Sales⁽¹⁾		Percentage of Total Net Sales		Dollar Change			Percent Change⁽²⁾
Corporate:
Medium / Large	$	2,899.6	42.8	%	$	2,863.2	47.2	%	$	36.4	1.3	%	0.5	%
Corporate															$	3,107.0	42.5	%	$	2,905.7	42.8	%	$	201.3		6.9	%

Small Business	571.8		8.4		545.8		9.0		26.0		4.8		3.9		620.2		8.5		565.7		8.3		54.5			9.6
Total Corporate	3,471.4		51.2		3,409.0		56.2		62.4		1.8		1.0

Public:
Government	796.5		11.7		685.0		11.3		111.5		16.3		15.4		930.8		12.7		796.5		11.7		134.3			16.9
Education	981.0		14.5		894.3		14.7		86.7		9.7		8.8		1,110.0		15.2		981.0		14.5		129.0			13.1
Healthcare	839.0		12.4		826.4		13.6		12.6		1.5		0.7		809.8		11.1		839.0		12.4		(29.2		)	(3.5	)
Total Public	2,616.5		38.6		2,405.7		39.6		210.8		8.8		7.9		2,850.6		38.9		2,616.5		38.6		234.1			8.9

Other	693.4		10.2		254.5		4.2		438.9		172.5		170.3		741.3		10.1		693.4		10.2		47.9			6.9

Total net sales	$	6,781.3	100.0	%	$	6,069.2	100.0	%	$	712.1	11.7	%	10.9	%	$	7,319.1	100.0	%	$	6,781.3	100.0	%	$	537.8		7.9	%


(1)	Effective January 1, ~~2016, CDW Advanced Services~~2017, Small Business is ~~included in our~~now an operating and reportable segment. Its results were previously presented as a sales channel within the Corporate ~~and Public segments and Other is comprised of CDW Canada and CDW UK.~~segment. Prior periods have been reclassified to conform to the current period presentation.


(2)	There were 128 ~~and 127~~ selling days for both the six months ended June 30, ~~2016~~2017 and ~~2015, respectively.~~2016.

Total ~~net~~Net sales for the six months ended June 30, ~~2016~~2017 increased ~~$712~~$538 million, or ~~11.7%~~7.9%, to ~~$6,781~~$7,319 million, compared to ~~$6,069~~$6,781 million for the six months ended June 30, ~~2015. On an average daily sales basis, total net sales increased 10.9%, reflecting both the impact of consolidating six months of CDW UK net sales and organic net sales growth.~~

Organic net sales, which excludes the impact of the acquisition of CDW UK, increased $272 million, or 4.5%, to $6,341 million for the six months ended June 30, 2016, compared to $6,069 million for the six months ended June 30, 2015. Organic net2016. Net sales on a constant currency basis, which excludes the impact of currency translation, for the six months ended June 30, ~~2016~~2017 increased ~~$289~~$592 million, or ~~4.8%~~8.8%, to ~~$6,341~~$7,319 million, compared to ~~$6,052~~

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$6,727 million for the six months ended June 30, ~~2015.~~2016. See “Non-GAAP Financial Measure Reconciliations” below for additional information. ~~On an organic basis, transactional product~~

For the six months ended June 30, 2017, we saw accelerated hardware sales, ~~grew faster than our solution-focused products. Growth in transactional products was led by notebooks/mobile devices due to continued innovation in form factors~~including increased client device sales growth, as well as ongoing focus on optimization and ~~a new vendor partner. Solutions-focused growth was driven by software, reflecting strong~~efficiency, security and ~~application suites growth.~~integration of software into solutions.

Corporate segment ~~net~~Net sales for the six months ended June 30, ~~2016~~2017 increased ~~$62~~$201 million, or ~~1.8%~~6.9%, compared to the six months ended June 30, ~~2015. On an average daily sales basis, Corporate segment net sales increased 1.0%. Within our Corporate segment, net sales to medium/large customers increased $36 million, or 1.3%, between periods,~~2016. Growth was primarily driven by ~~growth in transactional products. This growth was partially offset by declines in solution-focused products, due to~~customer refresh of client devices. Additionally, we saw momentum accelerate as we moved through the ~~impact of economic volatility which caused many customers to put longer tail projects on hold and to extend decision cycles.~~year.

Small Business segment Net ~~sales to small business customers increased by $26 million, or 4.8%, between periods, driven by growth in notebooks/mobile devices.~~

~~Public segment net~~ sales for the six months ended June 30, ~~2016~~2017 increased ~~$211~~by $55 million, or ~~8.8%~~9.6%, between periods, as customer confidence remained strong throughout the period. Sales growth was primarily driven by transactional products such as notebooks and mobile devices.

Public segment Net sales for the six months ended June 30, 2017 increased $234 million, or 8.9%, compared to the six months ended June 30, 2016, with balanced growth between solutions and transactional sales. The growth was driven by double-digit growth in ~~our government~~both Government and ~~education customer channels. On an average daily sales basis, Public segment net sales increased 7.9%.~~Education customers. Strong Net sales to our State and Local government customers ~~increased $111 million, or 16.3% between periods, reflecting growth in both federal and state/local government customers. A~~was driven by a continued focus on public safety and the addition of new ~~contracts drove the growth in net sales to state and local government customers.~~contracts. Net sales growth to ~~federal government~~Federal Government customers ~~grew modestly compared~~was strong as customers moved forward to ~~the prior year's~~spend existing budgets on planned projects, including client device refresh, as well as our ongoing successful alignment with strategic programs. Education results reflected strong ~~results as we continued to benefit~~growth from ~~strategic changes made to better align with new federal government purchasing~~

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~~programs. Net sales to education customers increased $87 million, or 9.7%, between periods, driven by~~both Higher Education and K-12 customers. K-12 growth ~~in both our K-12 and higher education customer channels. Growth in our K-12 customer channel~~ was led by ~~increases in notebooks/~~transactional products, particularly notebooks and mobile devices, desktops and ~~netcomm products,~~audio/video equipment, as ~~a result of the implementation of projects related~~schools continued to ~~the U.S. Federal Communications Commission E-Rate program and schools developing~~develop digital testing and curriculum programs. ~~Additionally,~~Sales to our Higher Education customers grew double-digits driven by networking hardware and software products as we ~~began~~continued to see the benefit from programs ~~pointed~~directed at select institutions ~~in our higher education channel.~~by optimizing opportunities with available budgets. Net sales to ~~healthcare~~Healthcare customers ~~increased $13 million, or 1.5%,~~decreased 3.5% between periods reflecting ~~the continuing impact of consolidation in the healthcare industry.~~customer uncertainty related to reimbursements and funding.

Net sales in Other for the six months ended June 30, ~~2016~~2017 increased ~~$439~~$48 million, or ~~172.5%~~6.9%, compared to the six months ended June 30, ~~2015.~~2016. Other is comprised of results from our Canadian and UK operations. Both operations had strong growth in local currency with CDW Canada growing high single-digits and CDW ~~UK. This increase was driven by the~~UK growing double digits. The impact of ~~consolidating six months of CDW~~currency reduced both Canada and UK ~~net sales. Net sales of CDW Canada were relatively flat for the six months ended June 30, 2016, which was impacted by unfavorable foreign currency translation. CDW Canada experienced mid-single digit~~ sales growth in ~~local currency.~~US dollars, with the majority of the impact resulting from UK sales translation.

Gross profit

Gross profit increased ~~$144~~$59 million, or ~~14.5%~~5.2%, to $1,194 million for the six months ended June 30, 2017, compared to $1,135 million for the six months ended June 30, ~~2016, compared~~2016. As a percentage of Net sales, Gross profit decreased 40 basis points to ~~$991 million~~16.3% for the six months ended June 30, ~~2015. As a percentage of total net sales, gross profit increased 40 basis points to~~2017, down from 16.7% for the six months ended June 30, ~~2016, up from 16.3% for the six months ended June 30, 2015.~~

~~Our continuing mix into net service contract revenue, including items such as third-party services, warranties and SaaS, contributed~~2016. The decline was driven by a ~~positive impact of 30~~70 basis points reduction due to ~~gross profit~~product margin as ~~our cost paid to the vendor or third-party service provider is recorded as~~ a ~~reduction to net~~result of increased hardware sales ~~resulting in net sales being equal to the gross profit on the transaction. We experienced~~and an ongoing competitive marketplace. This was partially offset by a favorable impact of 30 basis points principally from vendor partner ~~funding. Vendor partner~~ funding ~~includes purchase discounts, volume rebates~~ and ~~cooperative advertising. These increases were partially offset by 20 basis points of unfavorable price/mix changes as we mixed into transactional product categories such as notebooks/mobile devices.~~net service contract revenue.

~~The gross~~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 revenue, commission revenue, pricing strategies, market conditions and other factors.

Selling and administrative expenses

Selling and administrative expenses increased ~~$108~~$37 million, or ~~19.1%~~5.5%, to $711 million for the six months ended June 30, 2017, compared to $674 million for the six months ended June 30, ~~2016, compared to $566 million for the six months ended June 30, 2015.~~2016. As a percentage of total ~~net~~Net sales, ~~selling~~Selling and administrative expenses ~~increased 60~~decreased by 20 basis points to 9.7% in the second quarter of 2017, down from 9.9% in the ~~six months ended June 30, 2016, up from 9.3% in the comparable prior year period.~~second quarter of 2016. Sales payroll costs increased ~~$66~~$12 million, or ~~18.8%~~3.7%, between ~~years, primarily due to incremental coworkers hired since the second quarter of 2015, higher costs~~periods consistent with ~~increased sales and~~ Gross ~~profit~~Profit growth. Equity-based compensation expense and the inclusion of CDW UK coworker costs. Total coworker count was 8,712, up 1,434 from 7,278 at June 30, 2015. Total coworker count was 8,465 at December 31, 2015. Amortization expense related to intangiblesassociated taxes increased ~~$16~~$11 million, or ~~17.7%~~54.0%, during the six months ended June 30, ~~2016~~2017, compared to the prior year period, primarily due to ~~incremental amortization expense related to~~ the ~~intangible assets arising from our acquisition~~impact of ~~CDW UK. Non-cash equity-based compensation expense increased $6 million, or 43.8%, during the six months ended June 30, 2016 compared to the prior year period primarily due to~~ annual equity awards granted under our ~~2013~~ Long-Term Incentive Plan ~~in 2015~~ and due to the vesting of an equity ~~awards granted in connection with~~grant made at the time of our ~~acquisition of CDW UK.~~initial public offering and the related payroll taxes.

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Income from operations

Income from operations by segment, in dollars and as a percentage of ~~net~~Net sales, and the year-over-year percentage ~~change in income from operations for the six months ended June 30, 2016 and 2015 is~~changes are as follows:

Six Months Ended June 30,
2016 2015

Dollars in
Millions

Operating
Margin
Percentage

Dollars in
Millions

Operating
Margin
Percentage

Percent Change
in Income (Loss)
from Operations
Segments: ⁽¹⁾

Corporate⁽²⁾
$ 253.4
7.3 % 257.4
7.6 % (1.6 )%
Public⁽²⁾
166.7
6.4
146.4
6.1
13.9
Other⁽³⁾⁽⁴⁾
17.5
2.5
9.2
3.6
89.6
Headquarters ⁽⁵⁾
(53.1 ) nm*
(55.5 ) nm*
(4.4 )
Total income from operations $ 384.5
5.7 % 357.5
5.9 % 7.6 %



	Six Months Ended June 30,
	2017					2016
	Dollars in Millions			Operating Margin Percentage		Dollars in Millions			Operating Margin Percentage		Percent Change in Income from Operations
Segments:⁽¹⁾
Corporate	$	238.5		7.7	%	$	219.1		7.5	%	8.9	%
Small Business⁽²⁾	36.0			5.8		34.3			6.1		4.9
Public	165.1			5.8		166.7			6.4		(1.0	)
Other⁽³⁾	25.2			3.4		17.5			2.5		43.7
Headquarters⁽⁴⁾	(63.9		)	—		(53.1		)	—		20.3
Total income from operations	$	400.9		5.5	%	$	384.5		5.7	%	4.3	%

* Not meaningful


(1)	Segment income from operations includes the segment’s direct operating income, ~~and~~ allocations for Headquarters’ costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.


(2)	~~Certain costs related to technology specialists have been reclassified between our Corporate~~Effective January 1, 2017, Small Business is its own operating and ~~Public segments.~~reportable segment. The prior period has been reclassified to conform to the current period presentation.


(3)	Effective January 1, 2016, CDW Advanced Services is included in our Corporate and Public segments and Other is comprised of CDW Canada and CDW UK. The prior period has been reclassified to conform to the current period presentation.


~~(4)~~	Includes the financial results for our other operating segments, CDW Canada and CDW UK, which do not meet the reportable segment quantitative thresholds.


~~(5)~~(4)	Includes certain ~~Headquarters'~~Headquarters’ function costs that are not allocated to the segments. ~~Certain Headquarters expenses have been allocated to CDW Canada in 2016. The prior period has been reclassified to conform to the current period presentation.~~

Income from operations was $401 million for the six months ended June 30, 2017, an increase of $16 million, or 4.3%, compared to $385 million for the six months ended June 30, ~~2016, an increase of $27 million, or 7.6%, compared to $358 million for the six months ended June 30, 2015.~~2016. Total operating margin percentage decreased 20 basis points to 5.5% for the six months ended June 30, 2017, from 5.7% for the six months ended June 30, ~~2016, from 5.9% for the six months ended June 30, 2015.~~2016. Operating margin percentage decreased primarily due to increased hardware sales and an ongoing competitive marketplace, which was ~~negatively impacted~~partially offset by ~~an increase~~a decrease in Selling and administrative expenses as a percentage of Net ~~sales, primarily due to incremental coworkers hired since the second quarter of 2015, higher costs consistent with increased sales and Gross profit and the inclusion of CDW UK coworker costs.~~sales.

Corporate segment income from operations was ~~$253~~$239 million for the six months ended June 30, ~~2016, a decrease~~2017, an increase of $4$20 million, or ~~1.6%~~8.9%, compared to ~~$257~~$219 million for the six months ended June 30, ~~2015.~~2016. Corporate segment operating margin percentage increased 20 basis points to 7.7% for the six months ended June 30, 2017, from 7.5% for the six months ended June 30, 2016. This increase was primarily due to lower Selling and administrative expenses as a percentage of Net sales.

Small Business segment income from operations was $36 million for the six months ended June 30, 2017, an increase of $2 million, or 4.9%, compared to $34 million for the six months ended June 30, 2016. Small Business segment operating margin percentage decreased 30 basis points to ~~7.3%~~5.8% for the six months ended June 30, ~~2016,~~2017, from ~~7.6%~~6.1% for the six months ended June 30, ~~2015.~~2016. This decrease was primarily due to increased hardware sales and an ~~increase in selling and administrative expenses as a percentage of Net sales, due to higher costs related to incremental coworkers hired since the second quarter of 2015.~~ongoing competitive marketplace.

Public segment income from operations was $165 million for the six months ended June 30, 2017, a decrease of $2 million, or 1.0%, compared to $167 million for the six months ended June 30, 2016. Public segment operating margin percentage was 5.8% and 6.4% for the six months ended June 30, 2017 and 2016, respectively. The 60 basis point decrease in operating margin percentage was primarily driven by increased hardware sales, an ~~increase of $20 million, or 13.9%, compared to $146~~ongoing competitive marketplace and performance in Healthcare.

Other income from operations was $25 million for the six months ended June 30, ~~2015. Public segment operating margin percentage increased 30 basis points~~2017, an increase of $7 million, or 43.7%, compared to 6.4% for the six months ended June 30, 2016, from 6.1% for the six months ended June 30, 2015. This increase was driven by operating margin percentage was driven by a higher mix of net service contract revenue.

~~Other income from operations was~~ $18 million for the six months ended June 30, ~~2016, an increase $8 million, or 89.6%, compared~~2016. Other operating margin percentage increased 90 basis points to ~~$9 million~~3.4% for the six months ended June 30, ~~2015. This increase was primarily due to the inclusion of CDW UK income~~2017, from ~~operations. Other operating margin percentage decreased 110 basis points to~~ 2.5% ~~for the three months ended June 30, 2016, from 3.6% for the three months ended June 30, 2015.This decrease was primarily due to an increase in selling and administrative expenses as a percentage of Net sales, driven by higher intangibles amortization expense from our acquisition of CDW UK.~~

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~~Interest expense, net~~

~~At June 30, 2016, our outstanding debt totaled $3,240 million compared to $3,178 million at June 30, 2015. Net interest expense~~ for the six months ended June 30, ~~2016 was $75 million, a decrease of $8 million compared to $83 million for the six months ended June 30, 2015. This decrease was primarily due to~~2016. Operating margin percentage benefited from lower ~~effective interest rates as of June 30, 2016 compared to June 30, 2015~~intangible amortization expense as a ~~result~~percentage of ~~redemptions and refinancing activities completed during 2015.~~Net sales.

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Net loss on extinguishments of long-term debt

For information regarding our debt, see Note 56 (Long-Term Debt) to the accompanying Consolidated Financial Statements. During the six months ended June 30, ~~2016, there~~2017, we incurred a $57 million net loss on extinguishment of long-term debt, which represented the write-off of unamortized deferred financing costs and unamortized discounts related to the three loans in the below table. The loss recognized on the Senior Notes due 2022 also included the redemption premium of $37 million. There was no net loss on ~~extinguishments~~extinguishment of long-term debt ~~compared to $24.3 million recorded~~ for the same period of ~~2015.~~ 2016.

Net loss on extinguishments of long-term debt for the six months ended June 30, ~~2015 was~~2017 is as follows:

Month of Extinguishment Debt Instrument (in millions)
Amount Extinguished Loss Recognized
March 2015 2019 Senior Notes $ 503.9
$ (24.3 )
⁽¹⁾
Total Loss Recognized $ (24.3 )



Month of Extinguishment	Debt Instrument	(in millions)
Month of Extinguishment	Debt Instrument	Loss Recognized
February 2017	Senior Secured Term Loan Facility	$	(13.7	)
March 2017	Senior Notes due 2022	(42.5		)
March 2017	Senior secured asset-based revolving credit facility	(1.2		)
	Total Loss Recognized	$	(57.4	)


~~(1)~~	We redeemed all of the remaining aggregate principal amount outstanding. The loss recognized represents the difference between the redemption price and the net carrying amount of the purchased debt, adjusted for the remaining unamortized deferred financing costs and premium.

Income tax expense

Income tax expense was ~~$116~~$71 million for the six months ended June 30, ~~2016,~~2017, compared to ~~$96~~$116 million for the same period of the prior year. The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was ~~37.3%~~26.2% for the six months ended June 30, ~~2016, compared~~2017 and differed from the US federal statutory rate primarily due to ~~37.1%~~$30 million of excess tax benefits on equity compensation. The effective tax rate for the same period of the prior year was 37.3% and differed ~~in both periods~~ from the US federal statutory rate primarily due to state and local income taxes. The lower effective tax rate for the six months ended June 30, 2017 as compared to the same period of the prior year was primarily attributable to $30 million of excess tax benefits on equity compensation.

Non-GAAP Financial Measure Reconciliations

We have included reconciliations of Non-GAAP net income, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin ~~Organic net sales growth~~ and ~~Organic net~~consolidated Net sales growth on a constant currency basis for the six months ended June 30, 2017 and 2016 ~~and 2015~~ below.

~~EBITDA is defined as consolidated net income before interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA, which is a~~ See the “Non-GAAP Financial Measure Reconciliations” section included above for the three months ended June 30, 2017 for all Non-GAAP measure defined in our credit agreements, means EBITDA adjusted for certain items which are described in the table 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. Organic net sales growth is defined as net sales growth excluding the impact of acquisitions within the last twelve months. Organic net sales growth on a constant currency basis is defined as organic net sales growth excluding the impact of foreign currency translation on organic sales compared to the prior period.

EBITDA, Adjusted EBITDA, Non-GAAP net income, Organic net sales and Organic net sales growth are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position 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 management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

We believe these measures provide analysts, investors and management with helpful information regarding the underlying operating performance of our business, as they remove the impact of items that management believes are not reflective of underlying operating performance. Management uses these measures to evaluate period-over-period performance as management believes they provide a more comparable measure of the underlying business. Additionally, Adjusted EBITDA is a measure in the credit agreement governing our Senior Secured Term Loan Facility (“Term Loan”) used to evaluate 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 5 (Long-Term Debt) to the accompanying Consolidated Financial Statements.

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definitions.

Non-GAAP net income

Non-GAAP net income was $285 million for the six months ended June 30, 2017, an increase of $17 million, or 6.0%, compared to $268 million for the six months ended June 30, ~~2016, an increase of $31 million, or 13.4%, compared to $237 million for the six months ended June 30, 2015.~~2016.


	Six Months Ended June 30,						Six Months Ended June 30,
(in millions)	2016			2015			2017			2016
Net income	$	195.3		$	162.9		$	198.7		$	195.3
Amortization of intangibles⁽¹⁾	94.6			80.5			92.4			94.6
Non-cash equity-based compensation	18.1			12.2
Equity-based compensation							23.6			18.1
Net loss on extinguishments of long-term debt	—			24.3			57.4			—
Acquisition and integration expenses⁽²⁾	3.8			1.7
Integration expenses⁽²⁾							2.5			3.8
Other adjustments⁽³⁾	(2.8		)	1.6			4.9			(2.8		)
Aggregate adjustment for income taxes⁽⁴⁾	(40.7		)	(46.6		)	(95.0		)	(40.7		)
Non-GAAP net income⁽⁵⁾	$	268.3		$	236.6		$	284.5		$	268.3


(1)	Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.


(2)	~~Comprises~~Comprised of expenses related to CDW UK.


(3)	Primarily includes ~~the favorable resolution of a local sales tax matter in~~expenses related to payroll taxes on equity-based compensation during the six months ended June 30, ~~2016, partially offset by expenses related to the consolidation of office locations north of Chicago.~~

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2017 and 2016. 2016 also includes the favorable resolution of a local sales tax matter partially offset by expenses related to the consolidation of office locations north of Chicago.


(4)	~~Based on a normalized effective tax rate~~Aggregate adjustment for income taxes consists 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.~~ following:


~~(5)~~	~~Includes the impact of consolidating CDW UK's financial results for the six months ended June 30, 2016.~~



	Six Months Ended June 30,
	2017			2016
Total Non-GAAP adjustments	$	180.8		$	113.7
Weighted-average statutory effective rate	36.0		%	36.0		%
Income tax	(65.1		)	(40.9		)
Excess tax benefits from equity-based compensation	(30.1		)	—
Non-deductible adjustments and other	0.2			0.2
Total aggregate adjustment for income taxes	$	(95.0	)	$	(40.7	)

Adjusted EBITDA

Adjusted EBITDA was $564 million for the six months ended June 30, 2017, an increase of $31 million, or 5.7%, compared to $533 million for the six months ended June 30, ~~2016, an increase of $54 million, or 11.4%, compared to $479 million for the six months ended June 30, 2015.~~2016. As a percentage of Net sales, Adjusted EBITDA was ~~7.9%~~7.7% for ~~both~~ the six months ended June 30, ~~2016~~2017 and ~~2015.~~7.9% for the six months ended June 30, 2016.


	Six Months Ended June 30,								Six Months Ended June 30,
(in millions)	2016			Percentage of Net Sales	2015			Percentage of Net Sales	2017			Percentage of Net Sales		2016			Percentage of Net Sales
Net income	$	195.3			$	162.9			$	198.7				$	195.3
Depreciation and amortization	127.7				105.1				129.5					127.7
Income tax expense	116.1				96.2				70.5					116.1
Interest expense, net	75.0				82.6				75.6					75.0
EBITDA	514.1			7.6%	446.8			7.4%	474.3			6.5	%	514.1			7.6%

Adjustments:
Non-cash equity-based compensation	18.1				12.2
Equity-based compensation									23.6					18.1
Net loss on extinguishments of long-term debt	—				24.3				57.4					—
Income from equity investments(1)	(0.7		)		(8.5		)		(0.2		)			(0.7		)
Acquisition and integration expenses⁽¹⁾	3.8				1.7
Integration expenses⁽²⁾									2.5					3.8
Other adjustments⁽²⁾⁽³⁾	(2.0		)		2.3				6.3					(2.0		)
Total adjustments	19.2				32.0				89.6					19.2
Adjusted EBITDA⁽³⁾	$	533.3		7.9%	$	478.8		7.9%	$	563.9		7.7	%	$	533.3		7.9%


(1)	Represents our share of net income/loss from our equity investments.


(2)	~~Comprises~~Comprised of expenses related to CDW UK.


~~(2)~~(3)	Primarily includes expenses related to payroll taxes on equity-based compensation during the six months ended June 30, 2017 and 2016. 2016 also 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.~~ Chicago.

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~~(3)~~	~~Includes the impact of consolidating CDW UK's financial results for the six months ended June 30, 2016.~~

~~Organic net sales growth and organic~~Consolidated net sales growth on constant currency basis

~~Organic net~~Consolidated Net sales ~~which excludes the impact of the acquisition of CDW UK,~~ increased ~~$272~~$538 million, or ~~4.5%~~7.9%, to ~~$6,341~~$7,319 million for the six months ended June 30, ~~2016,~~2017, compared to ~~$6,069~~$6,781 million for the six months ended June 30, ~~2015. Organic net~~2016. Consolidated Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased ~~$289~~$592 million, or ~~4.8%~~8.8%, to ~~$6,341~~$7,319 million for the six months ended June 30, ~~2016,~~2017, compared to ~~$6,052~~$6,727 million for the six months ended June 30, ~~2015.~~2016.

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Six Months Ended June 30,
(in millions) 2016 2015 % Change
Average Daily % Change⁽¹⁾
Net sales, as reported $ 6,781.3
$ 6,069.2
11.7 % 10.9 %
Impact of acquisition⁽²⁾
(440.1 ) —

Organic net sales $ 6,341.2
$ 6,069.2
4.5 % 3.7 %
Foreign currency translation⁽³⁾
—
(17.5 )
Organic net sales, on a constant currency basis $ 6,341.2
$ 6,051.7
4.8 % 4.0 %



	Six Months Ended June 30,
(in millions)	2017		2016			% Change		Average Daily % Change⁽¹⁾
Consolidated Net sales, as reported	$	7,319.1	$	6,781.3		7.9	%	7.9	%
Foreign currency translation⁽²⁾	—		(54.4		)
Consolidated Net sales, on a constant currency basis	$	7,319.1	$	6,726.9		8.8	%	8.8	%


(1)	There were 128 ~~and 127~~ selling days for both the six months ended June 30, ~~2016~~2017 and ~~2015, respectively.~~2016.


(2)	~~Represents CDW UK's financial results for the six months ended June 30, 2016.~~


~~(3)~~	Represents the effect of translating the prior year results of CDW Canada and CDW UK's results at the average exchange rates applicable in the current year.

Seasonality

While we have not historically experienced significant seasonality throughout the year, sales in our Corporate segment, which primarily serves private sector business customers with more than 250 employees, 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 have historically been higher in the third quarter than in other quarters primarily due to the buying patterns of the federal government and education customers.

Liquidity and Capital Resources

Overview

We finance our operations and capital expenditures with internally generated cash from operations. WeAs of June 30, 2017, we also have ~~$778~~$1,016 million of availability for borrowings under our senior secured asset-based revolving credit facility and an additional £50 million ($6765 million) under the CDW UK revolving credit facility. Our liquidity and borrowing plans are established to align with our financial and strategic planning processes and ensure we have the necessary funding to meet our operating commitments, which primarily include the purchase of inventory, payroll and general expenses. We also take into consideration our overall capital allocation strategy, which includes investment for future growth, dividend payments, acquisitions and share repurchases. We believe we have adequate sources of liquidity and funding available at least for the next ~~year,~~year; however, there are a number of factors that may negatively impact our available sources of funds. The amount of cash generated from operations will be dependent upon factors such as the successful execution of our business plan and general economic conditions.

Debt Refinancing Activity

For details regarding our debt and refinancing activities, refer to Note 6 (Long-Term Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Share Repurchase Program

~~During the six months ended June 30, 2016, we repurchased 5.5 million shares of our common stock for $223 million under the previously announced $500 million share repurchase program.~~ On ~~May 4, 2016,~~August 3, 2017, we announced that our Board of Directors authorized a $750 million increase to our share repurchase program under which we may repurchase shares of our common stock in the open market or through privately negotiated or other transactions, depending on share price, market conditions and other factors. During the six months ended June 30, 2017, we repurchased 6 million shares of our common stock for $359 million under the share repurchase program. For more information on our share repurchase program, See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds.

Dividends

A summary of ~~2016~~2017 dividend activity for our common stock is as follows:

~~Table of Contents~~



Dividend Amount	Declaration Date	Record Date	Payment Date
$~~0.1075~~0.1600	February ~~9, 2016~~7, 2017	February ~~25, 2016~~24, 2017	March 10, ~~2016~~2017
$~~0.1075~~0.1600	May ~~4, 2016~~3, 2017	May 25, ~~2016~~2017	June ~~10, 2016~~12, 2017

On August 3, ~~2016,~~2017, we announced that our Board of Directors declared a quarterly cash dividend of ~~$0.1075~~$0.16 per common share. The dividend will be paid on September ~~12, 2016~~11, 2017 to all stockholders of record as of the close of business on August 25, ~~2016.~~2017.

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Cash Flows

Cash flows from operating, investing and financing activities were as follows:


	Six Months Ended June 30,						Six Months Ended June 30,
(in millions)	2016			2015			2017			2016
Net cash provided by (used in):
Operating activities	$	313.1		$	99.1		$	376.2		$	313.1
Investing activities	(25.7		)	(23.4		)	(36.8		)	(25.7		)

Net change in accounts payable-inventory financing	71.3			41.2			(85.1		)	71.3
Other financing activities	(264.0		)	(124.3		)	(441.6		)	(264.0		)
Financing activities	(192.7		)	(83.1		)	(526.7		)	(192.7		)

Effect of exchange rate changes on cash and cash equivalents	(2.9		)	(1.4		)	2.6			(2.9		)
Net increase (decrease) in cash and cash equivalents	$	91.8		$	(8.8	)
Net (decrease) increase in cash and cash equivalents							$	(184.7	)	$	91.8

Operating Activities


	Six Months Ended June 30,									Six Months Ended June 30,
(in millions)	2016			2015			Dollar Change			2017			2016			Dollar Change
Net income	$	195.3		$	162.9		$	32.4		$	198.7		$	195.3		$	3.4
Adjustments for the impact of non-cash items⁽¹⁾	99.2			94.0			5.2			173.4			99.2			74.2
Net income adjusted for the impact of non-cash items⁽²⁾	294.5			256.9			37.6			372.1			294.5			77.6
Changes in assets and liabilities:							—
Accounts receivable⁽³⁾	(74.9		)	(157.7		)	82.8			(156.3		)	(74.9		)	(81.4		)
Merchandise inventory	(99.0		)	(98.9		)	(0.1		)	(57.8		)	(99.0		)	41.2
Accounts payable-trade⁽⁴⁾	219.3			151.9			67.4			311.8			219.3			92.5
Other(5)	(26.8		)	(53.1		)	26.3			(93.6		)	(26.8		)	(66.8		)
Net cash provided by operating activities	$	313.1		$	99.1		$	214.0		$	376.2		$	313.1		$	63.1


(1)	Includes items such as Deferred income taxes, Depreciation and amortization, Equity-based compensation expense ~~Income from equity method investment~~ and Net loss on extinguishments of long-term debt.


(2)	The ~~increase in cash flows reflected~~change is primarily due to stronger operating results driven by ~~the impact of consolidating six months of CDW UK's financial results, organic~~Net sales ~~growth~~ and ~~lower interest expense, partially offset by higher income tax expense.~~Gross profit growth.


(3)	The ~~increase~~change in cash flow ~~was~~ primarily ~~due to an increase in collections during 2016 due~~reflects the impact of increased Net sales volume compared to the ~~higher accounts receivable balance as of December 31, 2015 driven by higher sales~~same period in ~~our Public segment where customers generally take longer to pay than customers in our Corporate segment.~~2016.


(4)	The change in cash flow is driven by the mix of vendors and variances in timing of payments between the periods.


(5)	The change in Other is driven by timing differences in compensation payments between periods and an increase in ~~cash flows was primarily~~the receivables from vendors due to the ~~timing of payments to vendors during the current period and longer payment terms with certain vendors.~~growth in business.

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In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle, 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. Components of our cash conversion cycle are as follows:

June 30,
(in days) 2016 2015
Days of sales outstanding (DSO)⁽¹⁾
44
41
Days of supply in inventory (DIO)⁽²⁾
13
13
Days of purchases outstanding (DPO)⁽³⁾
(40 ) (35 )
Cash conversion cycle 17
19



	June 30,
(in days)	2017		2016
Days of sales outstanding (“DSO”)⁽¹⁾	48		44
Days of supply in inventory (“DIO”)⁽²⁾	12		13
Days of purchases outstanding (“DPO”)⁽³⁾	(44	)	(40	)
Cash conversion cycle	16		17

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(1)	Represents the rolling three-month average of the balance of Accounts receivable, net at the end of the period, divided by average daily ~~net~~Net sales for the same three-month period. Also incorporates components of other miscellaneous receivables.


(2)	Represents the rolling three-month average of the balance of Merchandise inventory at the end of the period divided by average daily cost of sales for the same three-month period.


(3)	Represents the rolling three-month average of the combined balance of Accounts payable-trade, excluding cash overdrafts, and Accounts payable-inventory financing at the end of the period divided by average daily cost of sales for the same three-month period.

The cash conversion cycle decreased to 16 days at June 30, 2017 compared to 17 days at June 30, ~~2016 compared to 19 days at June 30, 2015.~~2016. The increase in DSO was primarily due to the impact of our higher ~~net~~sequential sales increase, as well as higher Net sales and ~~receivables~~related Accounts receivable for third-party services such as software as a service, software assurance and warranties. These services have an unfavorable impact on DSO as the receivable is recognized on the Consolidated Balance Sheet on a gross basis while the corresponding sales amount in the Consolidated Statement of Operations is recorded on a net basis. These services have a favorable impact on DPO as the payable is recognized on the Consolidated Balance Sheet without a corresponding Cost of sales in the Statement of Operations because the cost paid to the vendor or third-party service provider is recorded as a reduction to Net sales. In addition, DPO also increased due to the mix of payables with certain vendors that have longer payment terms.

Investing Activities

Net cash used in investing activities increased by $2$11 million in the six months ended June 30, ~~2016~~2017 compared to the same period of the prior year. Capital expenditures were ~~$26~~$37 million and ~~$23~~$26 million for the six months ended June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and primarily related to improvements to our information technology systems during both periods.

Financing Activities

Net cash used in financing activities increased by ~~$110~~$334 million in the six months ended June 30, ~~2016~~2017 compared to the same period of the prior year. The increase was primarily driven by share repurchases during the six months ended June 30, ~~2016~~2017, which resulted in an increase in cash used by financing activities of ~~$131~~$136 million ~~partially offset~~and by ~~the~~ changes in ~~Accounts~~accounts payable-inventory financing, which resulted in an increase in cash ~~provided~~used for financing activities of ~~$30~~$156 million. For more information on our share repurchase program, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds. The increase in cash ~~provided~~used by ~~Accounts~~accounts payable-inventory financing was primarily driven by ~~the increase in the accounts payable-inventory financing balance as of June 30, 2016, driven by~~ a new vendor ~~addition~~added to our previously existing inventory financing ~~agreement at December 31, 2015.~~agreement. For more information regarding our debt and refinancing activities, see Note 6 (Long-Term Debt) and Note 5 (Financial Instruments). In addition, an increase in dividends paid also contributed to the increase in cash used in financing activities.

Long-Term Debt and Financing Arrangements

As of June 30, ~~2016,~~2017, we had total indebtedness of ~~$3,240~~$3,296 million, of which ~~$1,565~~$1,549 million was secured indebtedness. At June 30, ~~2016,~~2017, we were in compliance with the covenants under our various credit agreements and indentures. The amount of CDW’s restricted payment capacity under the Senior Secured Term Loan Facility was ~~$680~~$991 million at June 30, ~~2016.~~2017. However, we are separately permitted to make restricted payments, so long as the total net leverage ratio is less than 3.25:1.00 on a pro forma basis. The total net leverage ratio was 2.81:1.00 as of June 30, 2017. The amount of restricted ~~net assets~~payment capacity for the CDW UK Term Loan was ~~$410~~$93 million ~~which was primarily comprised of goodwill and intangible assets.~~at June 30, 2017.

For additional details regarding our debt and refinancing activities, refer to Note 86 (Long-Term Debt) to the accompanying Consolidated Financial Statements ~~contained~~included in ~~the December 31, 2015 financial statements.~~Part I, Item 1 of this Form 10-Q.

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Inventory Financing Agreements

We have entered into agreements with certain financial intermediaries to facilitate the purchase of inventory from various suppliers under certain terms and conditions. These amounts are classified separately as Accounts payable-inventory financing on the Consolidated Balance Sheets. We do not incur any interest expense associated with these agreements as balances are paid when they are due. For further details, see Note 4 (Inventory Financing Agreements) to the accompanying Consolidated Financial ~~Statements.~~Statements included in Part I, Item 1 of this Form 10-Q.

Contractual Obligations

~~There~~Except as disclosed under Note 6 (Long-Term Debt) to the accompanying Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, there have been no material changes to our contractual obligations from those reported in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Commitments and Contingencies

The information set forth in Note 710 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Critical Accounting Policies and Estimates

Our critical accounting policies have not changed from those reported in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Recent Accounting Pronouncements

The information set forth in Note 2 (Recent Accounting Pronouncements) to the accompanying Consolidated Financial Statements included in Part I, Item 1 ~~"Financial Statements"~~“Financial Statements”, of this Form 10-Q is incorporated herein by reference.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact included in this report are forward-looking statements. These statements relate to analysis and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. We claim the protection of The Private Securities Litigation Reform Act of 1995 for all forward-looking statements in this report.

These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. However, these words are not the exclusive means of identifying such statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected.

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 and from time to time in our subsequent Quarterly Reports on Form 10-Q and our other SEC filings. These factors include, among others, global and regional economic conditions; decreases in spending on technology products; CDW's relationships with vendor partners and availability of their products; continued innovations in hardware, software and services offerings by CDW's vendor partners; substantial competition that could reduce CDW's market share; CDW's substantial indebtedness and ability to generate sufficient cash to service such indebtedness; restrictions imposed by agreements relating to CDW's indebtedness on its operations and liquidity; changes in, or the discontinuation of, CDW's share repurchase program or dividend payments; the continuing development, maintenance and operation of CDW's information technology systems; potential breaches of data security; potential failures to comply with Public segment contracts or applicable laws and regulations; potential failures to provide high-quality services to CDW's customers; potential losses of any key personnel; potential interruptions of the flow of products from suppliers; potential adverse occurrences at one of CDW's primary facilities or customer data centers; CDW's dependence on commercial delivery services; CDW's exposure to accounts receivable and inventory risks; fluctuations in foreign currency; future acquisitions or alliances; fluctuations in CDW's operating results; current and future legal proceedings and audits; potential acceleration of CDW's deferred cancellation of debt income; and other risk factors or uncertainties identified from time to time in CDW's filings with the SEC. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 and elsewhere in this report as well as other cautionary statements that are made from time to time in our other 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 may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements

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included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures ofabout Market ~~Risks”~~Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015. As of~~2016. During the six months ended June 30, ~~2016, there have been no material changes in this information.~~2017, the Company designated the interest rate cap agreements as cash flow hedges. Refer to Note 5 (Financial Instruments) for further information on the Company's derivative related activity during the six months ended June 30, 2017.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has concluded that, as of the end of such period, the Company's disclosure controls and procedures were effective in recording, processing, summarizing 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 Officer, as appropriate to allow timely discussions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the ~~quarter~~three months ended June 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth in Note 710 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1 ~~"Financial Statements"~~“Financial Statements”, of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

See “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2015. The disclosure below reflects an update to the risk factors previously disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2015.~~

~~General economic conditions may have an adverse impact on our business, results of operations or cash flows.~~

Weak economic conditions generally, sustained uncertainty about global economic conditions, government spending cuts and the impact of new government programs, or a tightening of credit markets, could cause our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could have an adverse effect on our business, results of operations or cash flows. For example, there is substantial uncertainty regarding the impact of the Referendum of the United Kingdom’s (“UK”) Membership of the European Union (“EU”) (referred to as “Brexit”), advising for the exit of the UK from the EU. Potential adverse consequences of Brexit such as global market uncertainty, volatility in currency exchange rates, greater restrictions on imports and exports between UK and EU countries and increased regulatory complexities could have a negative impact on our business, financial condition and results of operations.2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

Information relating to the Company’s purchases of its common stock during the ~~quarter~~three months ended June 30, ~~2016~~2017 is as follows:

Period Total Number of Shares Purchased (in millions) Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Program (in millions)
Maximum Dollar Value of Shares that May Yet be Purchased Under the Program ⁽¹⁾(in millions)
April 1 through April 30, 2016 —
$ —
—
$ 140.5
May 1 through May 31, 2016 0.4
$ 41.95
0.4
$ 872.2
June 1 through June 30, 2016 2.1
$ 42.00
2.1
$ 785.5
Total 2.5

2.5



Period	Total Number of Shares Purchased (in millions)	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program (in millions)	Maximum Dollar Value of Shares that May Yet be Purchased Under the Program ⁽¹⁾(in millions)
April 1 through April 30, 2017	1.1	$	57.93	1.1	$	403.0
May 1 through May 31, 2017	1.4	$	58.50	1.4	$	318.5
June 1 through June 30, 2017	0.6	$	61.67	0.6	$	282.7
Total	3.1			3.1

(1)

The amounts presented in this column are the remaining total authorized value to be spent after each month's repurchases. On ~~November 6, 2014,~~August 3, 2017, the Company announced that ~~the~~its Board of Directors ~~approved~~authorized a ~~$500~~$750 million increase to the share repurchase program ~~which became effective immediately,~~ under which the Company may repurchase shares of its common stock in the open market or through privately negotiated or other transactions, depending on share price, market conditions and other factors. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and repurchases may be commenced or suspended from time to time without prior notice. On May 4, 2016, the Company announced that its Board of Directors authorized a $750 million increase to the Company's share repurchase program, which became effective immediately.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Table of Contents~~

None.

Item 6. Exhibits

The information required by this Item is set forth on the exhibit index that follows the signature page of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		CDW CORPORATION

Date:	August 3, ~~2016~~2017	By:	/s/ Ann E. Ziegler
			Ann E. Ziegler
			Senior Vice President and Chief Financial Officer
			(Duly authorized officer and principal financial officer)

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EXHIBIT INDEX



Exhibit		Description

~~3.1~~		Fifth Amended and Restated Certificate of Incorporation of CDW Corporation, previously filed as Exhibit 3.1 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.

~~3.1.1~~31.1*		Certificate of Amendment to Fifth Amended and Restated Certificate of Incorporation of CDW Corporation, previously filed as Exhibit 3.1 with CDW Corporation's Form 8-K filed on May 19, 2016 and incorporated herein by reference.

3.2*		~~Amended and Restated By-Laws of CDW Corporation.~~

~~10.1§~~		~~Amended and Restated 2013 Long-Term Incentive Plan of CDW Corporation, previously filed as Exhibit 10.1 with CDW Corporation's Form 8-K filed on May 19, 2016 and incorporated herein by reference.~~

31.1*		Certification of Chief Executive Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934.

31.2*		Certification of Chief Financial Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934.

32.1, **		Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350.

32.2, **		Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350.

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

________________


*	Filed herewith


§	~~A management contract or compensatory arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K.~~


**	These items are furnished and not filed.

5049

CDW CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except per-share amounts)

	June 30, 2016			December 31, 2015
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	129.4		$	37.6
Accounts receivable, net of allowance for doubtful accounts of $5.9 and $6.0, respectively	2,082.5			2,017.4
Merchandise inventory	487.3			393.1
Miscellaneous receivables	260.3			198.4
Prepaid expenses and other	115.8			144.3
Total current assets	3,075.3			2,790.8
Property and equipment, net	163.8			175.4
Goodwill	2,475.0			2,500.4
Other intangible assets, net	1,162.0			1,276.4
Other assets	11.8			12.3
Total assets	$	6,887.9		$	6,755.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable-trade	$	1,078.1		$	866.5
Accounts payable-inventory financing	509.8			439.6
Current maturities of long-term debt	26.1			27.2
Deferred revenue	144.6			151.9
Accrued expenses:
Compensation	135.6			120.4
Interest	25.1			25.1
Sales taxes	26.9			38.1
Advertising	59.1			52.3
Income taxes	19.7			—
Other	152.7			166.2
Total current liabilities	2,177.7			1,887.3
Long-term liabilities:
Debt	3,214.4			3,232.5
Deferred income taxes	420.8			469.6
Other liabilities	61.6			70.0
Total long-term liabilities	3,696.8			3,772.1
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.01 par value, 100.0 shares authorized, no shares issued or outstanding for both periods	—			—
Common stock, $0.01 par value, 1,000.0 shares authorized; 163.2 and 168.2 shares issued and outstanding, respectively	1.6			1.7
Paid-in capital	2,831.1			2,806.9
Accumulated deficit	(1,715.3		)	(1,651.6		)
Accumulated other comprehensive loss	(104.0		)	(61.1		)
Total stockholders’ equity	1,013.4			1,095.9
Total liabilities and stockholders’ equity	$	6,887.9		$	6,755.3



(in millions)	Acquisition-Date Fair Value
Cash	$	291.6
Fair value of CDW common stock⁽¹⁾	33.2
Fair value of previously held equity investment on the date of acquisition⁽²⁾	174.9
Total consideration	$	499.7



(in millions)	Acquisition-Date Fair Value⁽¹⁾
Cash	$	27.8
Accounts receivable	135.7
Merchandise inventory	27.1
Property and equipment, net	11.4
Identified intangible assets⁽²⁾	289.8
Other assets	53.5
Total assets acquired	545.3
Accounts payable—trade	(86.1		)
Deferred revenue	(57.2		)
Other liabilities	(41.7		)
Deferred tax liabilities	(55.1		)
Debt	(111.5		)
Total liabilities assumed	(351.6		)
Total identifiable net assets	193.7

Goodwill	306.0

Total purchase price	$	499.7



(in millions)	Acquisition-Date Fair Value		Weighted-Average Amortization Period (in years)
Customer relationships	$	260.8	13
Customer contracts	25.9		3
Developed technology	1.7		2
Trade name	1.4		1
Total identified intangible assets	$	289.8



(in millions)	Three months ended		Six months ended
Net sales	$	3,541.0	$	6,513.6
Net income	115.7		171.7



(in millions)	June 30, 2016		December 31, 2015
Fair value	$	3,309.7	$	3,330.4
Carrying value	3,264.9		3,286.5

Consolidating Statement of Operations

Three Months Ended June 30, 2015⁽¹⁾
(in millions)	Parent Guarantor		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Co-Issuer		Consolidating Adjustments			Consolidated
Net sales	$	—	$	—		$	3,187.2		$	126.8		$	—	$	—		$	3,314.0
Cost of sales	—		—			2,667.9			111.6			—		—			2,779.5
Gross profit	—		—			519.3			15.2			—		—			534.5
Selling and administrative expenses	—		27.9			252.9			9.8			—		—			290.6
Advertising expense	—		—			36.9			1.1			—		—			38.0
Income (loss) from operations	—		(27.9		)	229.5			4.3			—		—			205.9
Interest (expense) income, net	—		(37.8		)	—			—			—		—			(37.8		)
Other income (expense), net	—		3.8			0.3			(0.1		)	—		—			4.0
Income (loss) before income taxes	—		(61.9		)	229.8			4.2			—		—			172.1
Income tax benefit (expense)	—		23.0			(85.7		)	(1.2		)	—		—			(63.9		)
Income (loss) before equity in earnings of subsidiaries	—		(38.9		)	144.1			3.0			—		—			108.2
Equity in earnings of subsidiaries	108.2		147.1			—			—			—		(255.3		)	—
Net income	$	108.2	$	108.2		$	144.1		$	3.0		$	—	$	(255.3	)	$	108.2

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2015
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiary		Co-Issuer		Consolidating Adjustments			Consolidated
Comprehensive income	$	112.9	$	112.9	$	144.1	$	7.8	$	—	$	(264.8	)	$	112.9

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2015
(in millions)	Parent Guarantor		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiary		Co-Issuer		Consolidating Adjustments			Consolidated
Comprehensive income	$	156.6	$	156.6	$	253.0	$	0.2	$	—	$	(409.8	)	$	156.6