Table of Contents




 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018March 31, 2019
or
¨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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):Act:
Large accelerated filer ý  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 30, 2018,April 26, 2019, there were 151,364,496146,021,999 shares of common stock, $0.01 par value, outstanding.
 


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CDW CORPORATION AND SUBSIDIARIES
FORM 10-Q


TABLE OF CONTENTS

  Page
PART IFINANCIAL INFORMATION 
Item 1.
Financial Statements:
 
 
Consolidated Balance Sheets as of June 30, 2018March 31, 2019 and December 31, 20172018
3
 
Consolidated Statements of Operations for the Three and Six Months Ended June 30,March 31, 2019 and 2018 and 2017
4
 
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30,March 31, 2019 and 2018 and 2017
5
 
Consolidated StatementStatements of Stockholders' Equity for the SixThree Months Ended June 30,March 31, 2019 and 2018
6
 
Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2019 and 2018 and 2017
7
 
Notes to Consolidated Financial Statements
8
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3728
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
5540
Item 4.
Controls and Procedures
5540
PART IIOTHER INFORMATION 
Item 1.
Legal Proceedings
5641
Item 1A.  
Risk Factors
5641
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
5641
Item 3.
Defaults Upon Senior Securities
5641
Item 4.
Mine Safety Disclosures
5641
Item 5.
Other Information
5641
Item 6.
Exhibits
5742
SIGNATURES
5843


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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per-share amounts)
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per-share amounts)
June 30, 2018 December 31, 2017March 31, 2019 December 31, 2018
Assets(unaudited) (as adjusted)(unaudited) 
Current assets:      
Cash and cash equivalents$100.7
 $144.2
$285.0
 $205.8
Accounts receivable, net of allowance for doubtful accounts of $7.1 and $6.2, respectively2,612.2
 2,329.3
Accounts receivable, net of allowance for doubtful accounts of $7.6 and $7.0, respectively2,725.1
 2,671.2
Merchandise inventory576.9
 411.5
590.7
 454.3
Miscellaneous receivables373.8
 343.0
353.4
 316.4
Prepaid expenses and other181.1
 168.3
178.3
 149.1
Total current assets3,844.7
 3,396.3
4,132.5
 3,796.8
Operating lease right-of-use assets132.1
 —
Property and equipment, net150.3
 161.1
155.2
 156.1
Goodwill2,472.5
 2,479.6
2,528.2
 2,462.8
Other intangible assets, net802.3
 897.0
696.0
 712.2
Other assets60.3
 32.7
35.5
 39.8
Total Assets$7,330.1
 $6,966.7
$7,679.5
 $7,167.7
Liabilities and Stockholders' Equity      
Current liabilities:      
Accounts payable-trade$1,693.6
 $1,317.7
$1,745.4
 $1,577.1
Accounts payable-inventory financing387.6
 498.0
500.0
 429.3
Current maturities of long-term debt38.6
 25.5
25.7
 25.3
Contract liabilities169.9
 158.8
192.1
 178.3
Accrued expenses and other current liabilities:  
  
Compensation138.4
 129.5
178.4
 186.4
Interest21.9
 21.6
Sales taxes38.3
 43.8
Advertising96.8
 89.2
125.3
 119.2
Income taxes22.1
 16.2
Sales and income taxes101.3
 55.5
Other212.8
 221.8
346.8
 232.0
Total current liabilities2,820.0
 2,522.1
3,215.0
 2,803.1
Long-term liabilities:      
Debt3,201.7
 3,210.0
3,257.7
 3,183.3
Deferred income taxes172.9
 196.3
132.7
 141.9
Operating lease liabilities93.0
 —
Other liabilities66.6
 52.7
53.8
 64.2
Total long-term liabilities3,441.2
 3,459.0
3,537.2
 3,389.4
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; 151.5 and 153.1 shares issued, respectively1.5
 1.5
Less: treasury stock, $0.01 par value, 0.0 and 0.1 shares held, respectively—
 —
Outstanding common stock, $0.01 par value, 151.5 and 153.0 shares outstanding, respectively1.5
 1.5
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; 146.3 and 147.7 shares outstanding, respectively1.5
 1.5
Paid-in capital2,953.3
 2,911.6
3,025.3
 2,996.9
Accumulated deficit(1,780.8) (1,831.6)(1,972.0) (1,892.6)
Accumulated other comprehensive loss(105.1) (95.9)(127.5) (130.6)
Total stockholders' equity1,068.9
 985.6
927.3
 975.2
Total Liabilities and Stockholders' Equity$7,330.1
 $6,966.7
$7,679.5
 $7,167.7


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


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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(unaudited)
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,
 2018 2017 2018 2017 Three Months Ended March 31,
 (unaudited) (as adjusted) (unaudited) (as adjusted) 2019 2018
Net sales $4,186.1
 $3,891.7
 $7,792.5
 $7,147.6
 $3,957.9
 $3,606.4
Cost of sales 3,490.5
 3,250.9
 6,493.0
 5,953.3
 3,285.8
 3,002.5
Gross profit 695.6
 640.8
 1,299.5
 1,194.3
 672.1
 603.9
Selling and administrative expenses 381.4
 363.5
 744.1
 710.9
 404.0
 362.7
Advertising expense 48.7
 46.5
 85.8
 81.9
 39.2
 37.1
Income from operations 265.5
 230.8
 469.6
 401.5
Operating income 228.9
 204.1
Interest expense, net (37.2) (35.9) (74.9) (75.6) (38.3) (37.7)
Net loss on extinguishments of long-term debt —
 —
 —
 (57.4)
Other income, net 1.5
 0.4
 0.8
 1.3
Other income (expense), net 1.0
 (0.7)
Income before income taxes 229.8
 195.3
 395.5
 269.8
 191.6
 165.7
Income tax expense (56.8) (54.4) (95.5) (70.8) (38.7) (38.7)
Net income $173.0
 $140.9
 $300.0
 $199.0
 $152.9
 $127.0
            
Net income per common share:            
Basic $1.14
 $0.90
 $1.98
 $1.26
 $1.04
 $0.83
Diluted $1.12
 $0.89
 $1.94
 $1.24
 $1.02
 $0.82
            
Weighted-average common shares outstanding:            
Basic 151.6
 156.0
 151.9
 157.7
 147.0
 152.2
Diluted 153.9
 159.0
 154.4
 160.9
 149.2
 154.8
        
Cash dividends declared per common share $0.2100
 $0.1600
 $0.4200
 $0.3200


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


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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
  Three Months Ended June 30, Six Months Ended June 30,
  2018 2017 2018 2017
  (unaudited) (as adjusted) (unaudited) (as adjusted)
Net income $173.0
 $140.9
 $300.0
 $199.0
Foreign currency translation, net(1)
 (28.9) 19.0
 (14.7) 25.5
Unrealized gain (loss) from hedge accounting, net(2)
 2.3
 (1.2) 5.5
 (1.6)
Other comprehensive (loss) income, net (26.6) 17.8
 (9.2) 23.9
Comprehensive income $146.4
 $158.7
 $290.8
 $222.9
The accompanying notes are an integral part of the Consolidated Financial Statements.
(1)Net of tax benefit of $0.1 million for both the three months ended June 30, 2018 and 2017, and net of tax benefit of $0.2 million and $0.1 million for the six months ended June 30, 2018 and 2017, respectively.
(2)Net of tax expense of $0.7 million and a tax benefit of $0.8 million for the three months ended June 30, 2018 and 2017, respectively, and net of tax expense of $1.8 million and a tax benefit of $1.1 million for the six months ended June 30, 2018 and 2017, respectively.


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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
  Preferred Stock Common Stock Treasury Stock        
  Shares Amount Shares Amount Shares Amount 
Paid-in
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive Loss
 Total
Stockholders' Equity
Balance as of
December 31, 2017 (as reported)
 —
 $—
 153.1
 $1.5
 0.1
 $—
 $2,911.6
 $(1,834.3) $(95.9) $982.9
Cumulative adjustment
upon adoption of ASC 606
 —
 —
 —
 —
 —
 —
 —
 2.7
 —
 2.7
Balance as of
December 31, 2017 (as adjusted)
 —
 —
 153.1
 1.5
 0.1
 —
 2,911.6
 (1,831.6) (95.9) 985.6
Net income —
 —
 —
 —
 —
 —
 —
 300.0
 —
 300.0
Equity-based compensation expense —
 —
 —
 —
 —
 —
 16.1
 —
 —
 16.1
Stock option exercises —
 —
 0.7
 —
 —
 —
 19.9
 —
 —
 19.9
Coworker Stock Purchase Plan —
 —
 0.1
 —
 —
 —
 5.4
 —
 —
 5.4
Repurchases of common stock —
 —
 (2.4) —
 —
 —
 —
 (176.4) —
 (176.4)
Dividends paid —
 —
 —
 —
 —
 —
 0.3
 (64.1) —
 (63.8)
Incentive compensation plan stock withheld for taxes —
 —
 —
 —
 (0.1) —
 —
 (8.7) —
 (8.7)
Foreign currency translation —
 —
 —
 —
 —
 —
 —
 —
 (14.7) (14.7)
Unrealized gain from hedge accounting —
 —
 —
 —
 —
 —
 —
 —
 5.5
 5.5
Balance as of
June 30, 2018
 —
 $—
 151.5
 $1.5
 —
 $—
 $2,953.3
 $(1,780.8) $(105.1) $1,068.9
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
  Three Months Ended March 31,
  2019 2018
Net income $152.9
 $127.0
Other comprehensive income:    
Unrealized (loss) gain from hedge accounting, net of tax (8.3) 2.7
Reclassification of hedge accounting gain to net income, net of tax 1.5
 0.5
Foreign currency translation, net of tax 9.9
 14.2
Other comprehensive income 3.1
 17.4
Comprehensive income $156.0
 $144.4
The accompanying notes are an integral part of the Consolidated Financial Statements.



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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
  Six Months Ended June 30,
  2018 2017
Cash flows from operating activities: (unaudited) (as adjusted)
Net income $300.0
 $199.0
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 132.9
 129.5
Equity-based compensation expense 19.1
 23.6
Deferred income taxes (28.1) (40.3)
Net loss on extinguishments of long-term debt —
 57.4
Other 5.1
 3.2
Changes in assets and liabilities:    
Accounts receivable (295.2) (156.0)
Merchandise inventory (167.7) (52.5)
Other assets (62.2) (125.6)
Accounts payable-trade 386.8
 311.8
Other liabilities 41.6
 26.1
Net cash provided by operating activities 332.3
 376.2
Cash flows used in investing activities:    
Capital expenditures (33.6) (36.8)
Net cash used in investing activities (33.6) (36.8)
Cash flows used in financing activities:    
Proceeds from borrowings under revolving credit facilities 488.1
 67.7
Repayments of borrowings under revolving credit facilities (474.4) (13.7)
Repayments of long-term debt (7.5) (7.5)
Proceeds from issuance of long-term debt —
 2,083.0
Payments to extinguish long-term debt —
 (2,121.3)
Payments of debt financing fees (1.0) (9.6)
Net change in accounts payable-inventory financing (110.4) (85.1)
Premium payments on interest rate cap agreements (12.6) —
Proceeds from stock option exercises 19.9
 7.4
Proceeds from Coworker Stock Purchase Plan 5.4
 4.7
Repurchases of common stock (176.4) (359.4)
Payment of incentive compensation plan withholding taxes

 (8.7) (42.0)
Dividends (63.8) (50.3)
Other 3.2
 (0.6)
Net cash used in financing activities (338.2) (526.7)
Effect of exchange rate changes on cash and cash equivalents (4.0) 2.6
Net decrease in cash and cash equivalents (43.5) (184.7)
Cash and cash equivalents—beginning of period 144.2
 263.7
Cash and cash equivalents—end of period $100.7
 $79.0
Supplementary disclosure of cash flow information:    
Interest paid $(74.5) $(76.8)
Taxes paid, net $(118.4) $(96.5)
CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
 Three Months Ended March 31, 2019
  Common Stock        
  Shares Amount Paid-in
Capital		 Accumulated
Deficit		 Accumulated
Other
Comprehensive Loss		 Total
Stockholders' Equity
Balance as of December 31, 2018 147.7
 $1.5
 $2,996.9
 $(1,892.6) $(130.6) $975.2
Net income —
 —
 —
 152.9
 —
 152.9
Equity-based compensation expense —
 —
 12.2
 —
 —
 12.2
Stock option exercises 0.5
 —
 13.0
 —
 —
 13.0
Coworker Stock Purchase Plan —
 —
 3.0
 —
 —
 3.0
Repurchases of common stock (1.9) —
 —
 (177.1) —
 (177.1)
Dividends paid ($0.295 per share) —
 —
 0.2
 (43.6) —
 (43.4)
Incentive compensation plan stock withheld for taxes —
 —
 —
 (11.6) —
 (11.6)
Foreign currency translation —
 —
 —
 —
 9.9
 9.9
Unrealized loss from hedge accounting —
 —
 —
 —
 (6.8) (6.8)
Balance as of March 31, 2019 146.3
 $1.5
 $3,025.3
 $(1,972.0) $(127.5) $927.3

  Three Months Ended March 31, 2018
  Common Stock        
  Shares Amount Paid-in
Capital		 Accumulated
Deficit		 Accumulated
Other
Comprehensive Loss		 Total
Stockholders' Equity
Balance as of December 31, 2017 153.1
 $1.5
 $2,911.6
 $(1,831.6) $(95.9) $985.6
Net income —
 —
 —
 127.0
 —
 127.0
Equity-based compensation expense —
 —
 7.1
 —
 —
 7.1
Stock option exercises 0.3
 —
 7.3
 —
 —
 7.3
Coworker Stock Purchase Plan —
 —
 2.4
 —
 —
 2.4
Repurchases of common stock (1.5) —
 —
 (109.2) —
 (109.2)
Dividends paid ($0.210 per share) —
 —
 0.1
 (32.1) —
 (32.0)
Incentive compensation plan stock withheld for taxes —
 —
 —
 (8.7) —
 (8.7)
Foreign currency translation —
 —
 —
 —
 14.2
 14.2
Unrealized gain from hedge accounting —
 —
 —
 —
 3.2
 3.2
Balance as of March 31, 2018 151.9
 $1.5
 $2,928.5
 $(1,854.6) $(78.5) $996.9
The accompanying notes are an integral part of the Consolidated Financial Statements.


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CDW CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
  Three Months Ended March 31,
  2019 2018
Cash flows from operating activities:    
Net income $152.9
 $127.0
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 64.3
 66.6
Equity-based compensation expense 12.7
 8.1
Deferred income taxes (13.7) (13.4)
Other 2.8
 1.1
Changes in assets and liabilities:    
Accounts receivable 11.9
 60.5
Merchandise inventory (134.2) (72.4)
Other assets (31.9) 15.4
Accounts payable-trade 116.0
 (29.8)
Other liabilities 71.6
 59.1
Net cash provided by operating activities 252.4
 222.2
Cash flows used in investing activities:    
Capital expenditures (19.4) (15.9)
Acquisition of business, net of cash acquired (68.7) —
Net cash used in investing activities (88.1) (15.9)
Cash flows used in financing activities:    
Proceeds from borrowings under revolving credit facility 88.5
 170.0
Repayments of borrowings under revolving credit facility (12.5) (170.0)
Repayments of long-term debt (5.9) (3.7)
Net change in accounts payable-inventory financing 70.2
 24.9
Repurchases of common stock (177.1) (109.2)
Payment of incentive compensation plan withholding taxes

 (11.6) (8.7)
Dividend payments (43.4) (32.0)
Other 11.6
 (2.5)
Net cash used in financing activities (80.2) (131.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 0.8
 1.7
Net increase in cash, cash equivalents and restricted cash 84.9
 76.8
Cash, cash equivalents and restricted cash—beginning of period 205.8
 144.2
Cash, cash equivalents and restricted cash—end of period $290.7
 $221.0
Supplementary disclosure of cash flow information:    
Interest paid $(44.1) $(42.7)
Taxes paid, net $(11.4) $(10.6)

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

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CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.Description of Business and Summary of Significant Accounting Policies
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 ("US"), the United Kingdom ("UK") and Canada. 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 as described in Note 13 (Supplemental Guarantor Information) and does not hold any material assets or engage in any business activities or operations.
Basis of Presentation
The accompanying unaudited interim Consolidated Financial Statements as of June 30, 2018March 31, 2019 and for the three and six months ended June 30,March 31, 2019 and 2018 and 2017 (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 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 and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 20172018 (the "December 31, 20172018 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, 20172018 Consolidated Financial Statements except for changes from the adoption of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, as amended ("Topic 606"), as discussed below.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.
Effective January 1, 2018, the Company adopted the requirements of Topic 606 utilizing the full retrospective method as discussed in Note 2 (Recent Accounting Pronouncements). Prior period amounts have been adjusted accordingly.
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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The notes to the Consolidated Financial Statements contained in the December 31, 20172018 Consolidated Financial Statements include a discussion of the significant accounting policies and estimates used in the preparation of the Company's Consolidated Financial Statements. Except as noted abovebelow for the adoption of Accounting Standards Update ("ASU") 2016-02, Leases ("Topic 606,842"), there have been no material changes to the Company's significant accounting policies and estimates during the sixthree months ended June 30, 2018.March 31, 2019.
Revenue Recognition

The Company is a primary distribution channel for a large group of vendors and suppliers, including original equipment manufacturers ("OEMs"), software publishers and wholesale distributors.

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of consideration is probable. The Company evaluates the following indicators amongst others when determining whether it is acting as a principal in the transaction and recording revenue on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If the terms of a transaction do not indicate the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

The Company recognizes revenue once control has passed to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) the Company has a right to payment for the product or service, (ii) the customer has legal title to the product, (iii) the Company has transferred physical possession of the product to the customer, (iv) the customer has the significant risk and rewards of ownership of the product and (v) the customer has accepted the product. The Company's products can be delivered to customers in a variety of ways, including (i) as physical product shipped from the Company's warehouse, (ii) via drop-shipment by the vendor or supplier or (iii) via electronic delivery of keys for software licenses. The Company’s shipping terms typically specify F.O.B. destination.

The Company leverages drop-shipment arrangements with many of its vendors and suppliers to deliver products to its customers without having to physically hold the inventory at its warehouses. The Company is the principal in the transaction and recognizes revenue for drop-shipment arrangements on a gross basis.

Revenue Recognition for Hardware
Revenues from sales of hardware products are recognized on a gross basis as the Company is acting as a principal in these transactions, with the selling price to the customer recorded as Net sales and the acquisition cost of the product recorded as Cost of sales. The Company recognizes revenue from these transactions when control has passed to the customer, which is usually upon delivery of the product to the customer.
In some instances, the customer agrees to buy the product from the Company but requests delivery at a later date, commonly known as bill-and-hold arrangements. For these transactions, the Company deems that control passes to the customer when the product is ready for delivery. The Company views products ready for delivery when the customer has a signed agreement, significant risk and rewards for the products, the ability to direct the assets, the products have been set aside specifically for the customer, cannot be redirected to another customer and for customer orders that include configuration services, when such services have been completed.

The Company's vendor partners warrant most of the products the Company sells. These manufacturer warranties are assurance-type warranties and are not considered separate performance obligations. The warranties are not sold separately and only provide assurance that products will conform with the manufacturer's specifications. In some transactions, a third-party will provide the customer with an extended warranty. These extended warranties are sold separately and provide the customer with a service in addition to assurance that the product will function as expected. The Company considers these service-type warranties to be separate performance obligations from the underlying product. For service-type warranties, the Company is arranging for those services to be provided by the third-party and therefore is acting as an agent in the transaction and records revenue on a net basis at the point of sale.



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Revenue RecognitionLeases
The Company enters into operating lease contracts, as assessed at contract inception, primarily for Software
Revenues from most software license salesreal estate, data centers and equipment. On the Company's Consolidated Balance Sheets, Operating lease assets are recognizedincluded in Operating lease right-of-use assets and Operating lease liabilities are included in Other current liabilities and Operating lease liabilities. At the lease commencement date, the Company records Operating lease liabilities based on the present value of the future lease payments. In determining the present value of future lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. For real estate and data center contracts, the Company accounts for the lease and non-lease components as a single performance obligation on a gross basis aslease component. For certain equipment leases, the Company applies a portfolio approach to account for the right-of-use asset and operating lease liability. In assessing the lease term, the Company includes options to renew only when it is acting asreasonably certain that it will be exercised; a principal in these transactionsdetermination which is at the point the software license is delivered to the customer. Generally, software licenses are sold with accompanying third-party delivered software assurance, which is a product that allows customers to upgrade, at no additional cost, to the latest technology if new capabilities are introduced during the period that the software assurance is in effect. The Company evaluates whether the software assurance is a separate performance obligation by assessing if the third-party delivered software assurance is critical or essential to the core functionalitysole discretion of the software itself. This involves considering ifCompany. Generally, for leases with an initial term of 12 months or less, the software provides its original intended functionality to the customer without the updates, if the customer would ascribe a higher value to the upgrades versus the up-front deliverable, if the customer would expect frequent intelligence updates to the software (such as updates that maintain the original functionality), and if the customer choosesCompany has elected to not delay or always install upgrades. Ifrecord a right-of-use asset and lease liability. For equipment leases used in revenue generating activities, the Company determines that the accompanying third-party delivered software assurance is criticalwill record a right-of-use asset and lease liability for leases with a term of 12 months or essential to the core functionality of the software license, the software license and the accompanying third-party delivered software assurance are recognized as a single performance obligation. The value of the product is primarily the accompanying support delivered by a third-party and therefore the Company is acting as an agent in these transactions and recognizes them on a net basis at the point the associated software license is delivered to the customer. For software licenses where the accompanying third-party delivered software assurance is not critical or essential to the core functionality, the software assurance is recognized as a separate performance obligation, with the associated revenue recognized on a net basis at the point the related software license is delivered to the customer. For additional details regarding the accounting for bundled arrangements, see "Revenue Recognition for Bundled Arrangements" below.
Revenue Recognition for Services
The Company provides professional services, which include project managers and consultants recommending, designing and implementing IT solutions. Revenue from professional services is recognized either on a time and materials basis or recognized proportionally as costs are incurred for fixed fee project work. For time and materials projects, revenue is recognized on a gross basis each month as work is performed and the Company transfers those services.
The Company sells cloud computing solutions, which include Software as a Service ("SaaS") and Infrastructure as a Service ("IaaS"). SaaS solutions utilize third-party partners to offer the Company's customers access to software in the cloud that enhances office productivity, provides security or assists in collaboration. IaaS solutions utilize third-party partners to enable customers to access data center functionality in a cloud-based solution, including storage, computing and networking. The Company recognizes revenue for cloud computing solutions for arrangements with one-time invoicing to the customer at the time of invoice on a net basis as the Company is acting as an agent in the transaction. For monthly subscription-based arrangements, the Company is acting as an agent in the transaction and recognizes revenue as it invoices the customer for its monthly usage on a net basis.

Revenues from the sale of data center services, such as managed and remote managed services, server co-location, internet connectivity and data backup and storage provided by the Company, are recognized over the period the service is provided. Most hosting and managed service obligations are based on the quantity and pricing parameters established in the agreement. As the customer receives the benefit of the service each month, the Company recognizes the respective revenue on a gross basis as the Company is acting as a principal in the transaction. Additionally, the Company's managed services team provides project support to customers that are billed on a fixed fee basis. The Company is acting as the principal in the transaction and recognizes revenue on a gross basis based on the total number of hours incurred for the period over the total expected hours for the project. Total expected hours to complete the project is updated for each period and best represents the transfer of control of the service to the customer.

The Company's customers are offered the opportunity by certain of its vendors to purchase software licenses and software assurance under enterprise agreements ("EAs"), referred to as services in this paragraph. For most EA transactions, the Company's obligation to the customer is that of a distributor or sales agent of the services, where all obligations for providing the services to customers are passed to the Company's vendors. The Company's performance obligations are satisfied at the time of the sale. In other EA transactions, the Company is responsible for fulfilling the promised services to the customer and providing remedy or refund for work if the customer is not satisfied with the delivered services, has inventory risk in the arrangement and has full control to set the price for the customer. This results in the Company acting as a principal in the agreement. With most EAs, the Company's vendors will transfer the license and invoice the customer

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

directly, paying resellers an agency fee or commission on these sales.less. The Company records these fees as a component of Net sales as earned and there is no corresponding Cost of sales amount.

Revenue Recognition for Bundled Arrangements
The Company also sells some of its products and services as part of bundled contract arrangements containing multiple deliverables, which may include a combination of products and services. For each deliverable that represents a distinct performance obligation, total arrangement consideration is allocated based upon the standalone selling prices of each performance obligation. The Company excludes amounts collected on behalf of third-parties, such as sales taxes, when determining the transaction price. For certain performance obligations, the Company will use a combination of methods to estimate the standalone selling price. When evidence from recent transactions is not available to confirm that the prices are representative of the standalone selling price, an expected cost plus a margin approach is used.
Sales In-Transit
The Company performs an analysis of the estimated number of days of sales in-transit to customers at the end of each reporting period basedlease expense on a weighted-average analysis of commercial delivery terms that include drop-shipment arrangements. This analysis isstraight-line basis over the basis upon which the Company estimates the amount of Net sales in-transit at the end of the period and adjusts revenue and the related costs to reflect only what has been delivered to the customer. Changes in delivery patterns may result in a different number of business days estimated to make this adjustment.
Freight Costs
The Company records freight billed to its customers as Net sales and the related freight costs as a Cost of sales when the underlying product revenue is recognized. For freight not billed to its customers, the Company records the freight costs as a Cost of sales. The Company's typical shipping terms are F.O.B. destination, which results in shipping being performed before the customer obtains control of the product. The Company considers shipping to be a fulfillment activity and not a separate performance obligation.
Other
The nature of the Company's contracts give rise to variable consideration in the form of sales returns and allowances. The Company estimates variable consideration at the most likely amount to which it is expected to be entitled. This estimated amount is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of the Company's anticipated performance and all information that is reasonably available. At the time of sale, the Company records an estimate for sales returns and allowances and an associated right of return asset based on historical experience.
When a contract results in revenue being recognized in excess of the amount the Company has the right to invoice to the customer, a contract asset is recordedlease term beginning on the balance sheet. Contract assetscommencement date.
Cash, Cash Equivalents and Restricted Cash
Restricted cash represents funds that are comprised primarilyrestricted to satisfy designated current liabilities. The following table provides a reconciliation of professional services with fixed fee arrangements.
Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services. Contract liabilities are comprised primarily of professional services with fixed fee arrangements, bill-and-hold transactions where control has not passed to the customercash, cash equivalents and certain governmental contracts.

Trade accounts receivable are recorded at the point of sale (or in accordance with the Statement of Work for services) for the total amount payable by the customer to the Company for sale of goods. Taxes to be collected from the customer as part of the sale are included in Accounts receivable.

Any incremental direct costs of obtaining a contract, primarily sales commissions, are deferred onrestricted cash reported within the Consolidated Balance Sheets and amortized over the period of contract performance.
The Company typically does not enter into long-term contracts. The Company has elected to use the practical expedient for its performance obligations table to show only those contracts that are longer than 12 months at the time of contract inception and those contracts that are non-cancelable. Additionally, for certain governmental contracts where there are

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annual renewals, the Company has excluded these contracts since there is only a one-year legal obligation. Typically, the only contracts that are longer than 12 months in duration are relatedsum to the Company's professional and managed services business.total of the same amounts in the Consolidated Statements of Cash Flows.
The Company requests payments for its products and services at the point of sale. The Company generally does not enter into any long-term financing arrangements or payment plans with customers or contracts with customers that have non-cash consideration.
(in millions) March 31, 2019 December 31, 2018 March 31, 2018 December 31, 2017
Cash and cash equivalents $285.0
 $205.8
 $221.0
 $144.2
Restricted cash:        
Prepaid expenses and other 5.7
 —
 —
 —
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows $290.7
 $205.8
 $221.0
 $144.2

2.
2.Recent Accounting Pronouncements
Accounting for Hedging Activities
In August 2017, the Financial Accounting Standards Board (the "FASB") issued ASU 2017-12, Derivatives and Hedging (Topic 815), intending to improve the transparency of information included in the financial statements by aligning cash flow and fair value hedge accounting with its risk management activities. The ASU eliminates the requirement to separately measure and report hedge ineffectiveness for cash flow hedges and net investment hedges, and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The ASU also simplifies certain documentation and assessment requirements, and will incorporate new disclosure requirements and amendments to existing disclosures. This ASU is effective for the Company beginning the first quarter of 2019 and allows for early adoption. The Company is currently evaluating the impact the ASU will have on its Consolidated Financial Statements.Pronouncements
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASBFinancial Accounting Standards Board (the "FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ThisThe 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. ThisThe ASU also expands the disclosure requirements to enable users of financial statements to understand the assumptions, models and methods for estimating expected credit losses. ThisThe 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.adoption. The Company is currently evaluating the impact the ASU will have on its Consolidated Financial Statements.
Accounting for Leases
In February 2016,On January 1, 2019, the FASB issued ASU 2016-02, Leases (Topic 842), requiring lessees to recognizeCompany adopted and applied Topic 842. The adoption of the standard resulted in the recognition of right-of-use assets and additional lease liabilities on the balance sheetof $81 million as of January 1, 2019, mainly related to operating leases for the rights and obligations created by long-term leases andCompany's real estate portfolio. For additional details regarding the impact to disclose additional quantitative and qualitative information about leasing arrangements. This ASU is effective forthe Company's Consolidated Balance Sheets from adopting this standard, see Note 9 (Leases).
3.    Acquisition
On February 1, 2019, the Company beginningcompleted the acquisition of all issued and outstanding shares of Scalar Decisions Inc. ("Scalar"), a leading technology solutions provider in Canada, for a preliminary total purchase price of $86 million of which $13 million is deferred to satisfy potential indemnity obligations and is expected to be paid in the first quarter of 2019 and allows for early adoption. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements.
2021. The Company has established a cross-functional implementation team to analyze the effect of the ASU. The Company is utilizing a combination of a bottom-up and top-down approach to identify and analyze its lease portfolio. The Company is in the process of evaluating its identified leases. In addition, the Company is evaluating business processes and internal controls to meet the ASU’s accounting, reporting and disclosure requirements. Although the Company is currently evaluating the provisions of the ASU to determine how itfinal purchase price will be affected, the primary impact to the Companydetermined following completion of the new ASU will be to record assets and liabilities for current operating leases, which are principally related to the Company's real estate portfolio.working capital adjustments. This strategic
Revenue Recognition
On January 1, 2018, the Company adopted Topic 606 and utilized the full retrospective method. For additional details, see Note 1 (Description of Business and Summary of Significant Accounting Policies).    


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The adoption of Topic 606 impactedacquisition expands the Company's solutions and services portfolio, extends the Company's in-market presence across Canada and enhances the value that the Company can deliver to its customers. The financial results of Scalar have been included in the Company's Consolidated Financial Statements since the date of the acquisition. Financial results are included in the Canada operating segment which is shown in an all other category ("Other") along with CDW UK. The purchase price allocation is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available.
The preliminary purchase price allocation is as follows:
  
Three Months Ended June 30, 2017(1)
 
Six Months Ended June 30, 2017(1)
(in millions)
(except per share amounts)
 As Reported New Revenue Standard Adjustment As Adjusted As Reported New Revenue Standard Adjustment As Adjusted
Net sales $3,994.4
 $(102.7) $3,891.7
 $7,319.1
 $(171.5) $7,147.6
Gross profit 641.1
 (0.3) 640.8
 1,193.6
 0.7
 1,194.3
Gross profit margin 16.1% 40 bps
 16.5% 16.3% 40 bps
 16.7%
             
Income from operations 231.1
 (0.3) 230.8
 400.9
 0.6
 401.5
Income tax expense (54.5) 0.1
 (54.4) (70.5) (0.3) (70.8)
Net income $141.0
 $(0.1) $140.9
 $198.7
 $0.3
 $199.0
             
Net income per common share            
Basic $0.90
 $—
 $0.90
 $1.26
 $—
 $1.26
Diluted $0.89
 $—
 $0.89
 $1.23
 $0.01
 $1.24
(in millions) Acquisition-Date Fair Value
Net assets acquired $7.2
Identified intangible assets(1)
 18.8
Goodwill(2)
 60.4
Total purchase price $86.4
(1)Amounts may not foot or cross-foot due to rounding.Net of a related deferred tax liability of $7 million.
The adoption of Topic 606 impacted the Company's Consolidated Balance Sheet as follows:
  
December 31, 2017(1)
(in millions) As Reported New Revenue Standard Adjustment As Adjusted
Accounts receivable $2,320.5
 $8.8
 $2,329.3
Merchandise inventory 449.5
 (38.0) 411.5
Miscellaneous receivables 336.5
 6.5
 343.0
Prepaid expenses and other 127.4
 40.9
 168.3
Total current assets 3,378.1
 18.2
 3,396.3
       
Other assets 40.8
 (8.1) 32.7
Total assets 6,956.6
 10.1
 6,966.7
       
Contract liabilities 194.0
 (35.2) 158.8
Income tax payable 15.1
 1.1
 16.2
Other accrued expenses 180.2
 41.6
 221.8
Total current liabilities 2,514.6
 7.5
 2,522.1
       
Total liabilities 5,973.7
 7.5
 5,981.1
Total stockholders’ equity $982.9
 $2.7
 $985.6
(1)(2)Amounts mayGoodwill in the amount of $60 million was recognized in connection with the acquisition of Scalar, primarily attributed to cross selling opportunities and overall corporate synergies. The full amount of goodwill recognized is not foot or cross-foot due to rounding.deductible for income tax purposes in Canada.
3.    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, as described below. 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts included in Accounts payable-inventory financing are as follows:
(in millions) March 31, 2019 December 31, 2018
Revolving Loan inventory financing agreement(1)
 $475.0
 $406.3
Other inventory financing agreements 25.0
 23.0
Accounts payable-inventory financing $500.0
 $429.3
(in millions) June 30, 2018 December 31, 2017
Revolving Loan inventory financing agreement(1)
 $380.0
 $480.9
Other inventory financing agreements 7.6
 17.1
Accounts payable-inventory financing $387.6
 $498.0

(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.
4.     5.     Contract Liabilities and Remaining Performance Obligations
The Company's contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services. The Company's contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. As of June 30, 2018March 31, 2019 and December 31, 2017,2018, the contract liability balance was $170$192 million and $159$178 million, respectively. During the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, the Company recognized revenue of $116$74 million and $99$58 million, respectively, related to its contract liabilities.
A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For more information regarding the Company's performance obligations, see Note 1 (Description of Business and Summary of Significant Accounting Policies). The following table represents the total transaction price for the remaining performance obligations as of June 30, 2018March 31, 2019 related to non-cancelable contracts longer than 12 months in duration that is expected to be recognized over future periods.
(in millions) Within 1 Year Years 1-2 Years 2-3 Thereafter
Remaining performance obligations $39.0
 $21.8
 $5.1
 $0.3


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions) Within 1 Year Years 1-2 Years 2-3 Thereafter
Remaining performance obligations $33.6
 $20.8
 $6.2
 $0.9

5.6.
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 Company has interest rate cap agreements that entitle it to payments from the counterparty of the amount, if any, by which three-month LIBOR exceeds the strike rates of the caps during the agreement period in exchange for an upfront premium. During the first quarter of 2018,2019, the Company entered into interest rate cap agreements with a combined notional value of $1.4$1.0 billion resulting in premiums paid to the counterparties of $13$6 million. As of June 30, 2018March 31, 2019 and December 31, 2017,2018, the Company had the following interest rate cap agreements for which the fair values are classified within Other assets on the Consolidated Balance Sheets:
      March 31, 2019 December 31, 2018
Notional Value (in millions) Effective Date Maturity Date Fair Value (in millions) Fair Value (in millions)
$1,400.0
 December 31, 2018 December 31, 2020 $4.4
 $10.6
1,200.0
 December 31, 2020 December 31, 2022 3.9
 1.5
      $8.3
 $12.1
      June 30, 2018 December 31, 2017
Notional Value (in millions) Effective Date Maturity Date Fair Value (in millions) Fair Value (in millions)
$1,400.0
 January 17, 2017 December 31, 2018 $6.4
 $5.4
1,400.0
 December 31, 2018 December 31, 2020 17.1
 —
      $23.5
 $5.4

The fair valuevalues of the Company's interest rate cap agreements isare 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.

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The counterparty credit spreads are based on publicly available credit information obtained from a third-party credit data provider. For additional details, see Note 67 (Long-Term Debt).
The interest rate cap agreements are designated as cash flow hedges. The effective portion of changes in the fair value of derivatives that qualify as cash flow hedges isare recorded in Accumulated other comprehensive loss and isare 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 into earnings. The Company's interest rate cap agreements were deemed effective during both the six months ended June 30, 2018 and 2017, and the Company expects the derivatives will continue to be effective for the next twelve months. During the three and six months ended June 30, 2018, the Company recorded a gain of $2$7 million loss and $5a $3 million respectively,gain, net of a tax, expense for the effective portion of the interest rate cap agreements into Accumulated other comprehensive loss.loss for the three months ended March 31, 2019 and 2018, respectively. During the three and six months ended June 30, 2017, the Company recorded a loss of $1 millionMarch 31, 2019 and $2 million respectively, net of a tax benefit, for the effective portion of the interest rate cap agreements into Accumulated other comprehensive loss. During the three and six months ended June 30, 2018, the Company reclassified less than $1 million and $2 million, respectively, from Accumulated other comprehensive loss to earnings within Interest expense, net on the Consolidated Statement of Operations. The Company expects to reclassify $5$6 million from Accumulated other comprehensive loss into Interest expense, net during the next twelve12 months.


Prior to the election of hedge accounting treatment during the first quarter of 2017, the Company recognized less than $1 million of Interest income during the six months ended June 30, 2017 in the Company's Consolidated Statement of Operations related to the changes in the fair value of the interest rate cap agreements.
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6.Long-Term Debt
Long-term debt as of June 30, 2018 is as follows:
(dollars in millions) 
Interest
Rate
 Principal Unamortized Discount and Deferred Financing Fees Total
Senior secured asset-based revolving credit facility
—% $—
 $—

$—
CDW UK revolving credit facility 1.9% 13.2
 —
 13.2
Senior secured term loan facility (1)

3.9% 1,460.6
 (2.8)
1,457.8
CDW UK term loan 1.9% 73.9
 (1.2) 72.7
Senior notes due 2023
5.0% 525.0
 (4.0)
521.0
Senior notes due 2024
5.5% 575.0
 (4.8)
570.2
Senior notes due 2025
5.0% 600.0
 (6.8)
593.2
Other long-term obligations   12.2
 —
 12.2
Total debt   3,259.9
 (19.6) 3,240.3
Less current maturities   (38.6) —
 (38.6)
Long-term debt, excluding current maturities   $3,221.3
 $(19.6) $3,201.7
(1)The Senior secured term loan facility has a variable interest rate, which has effectively been capped through the use of an interest rate cap (see Note 5 (Financial Instruments)). The interest rate disclosed represents the variable interest rate in effect as of June 30, 2018.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Long-term debt as of December 31, 2017 is as follows:
7.
Long-Term Debt
(dollars in millions) Interest
Rate		 Principal Unamortized Discount and Deferred Financing Fees Total
Senior secured asset-based revolving credit facility —% $—
 $—
 $—
CDW UK revolving credit facility —% —
 —
 —
Senior secured term loan facility (1)
 3.7% 1,468.0
 (2.0) 1,466.0
CDW UK term loan 1.9% 75.7
 (1.4) 74.3
Senior notes due 2023 5.0% 525.0
 (4.5) 520.5
Senior notes due 2024 5.5% 575.0
 (5.2) 569.8
Senior notes due 2025 5.0% 600.0
 (7.3) 592.7
Other long-term obligations   12.2
 —
 12.2
Total debt   3,255.9
 (20.4) 3,235.5
Less current maturities   (25.5) —
 (25.5)
Long-term debt, excluding current maturities   $3,230.4
 $(20.4) $3,210.0
    As of March 31, 2019 As of December 31, 2018
(dollars in millions) Maturities Interest Rate Amount Interest Rate Amount
Credit Facilities          
CDW UK revolving credit facility(1)
 July 2021 —% $—
 —% $—
Senior secured asset-based revolving credit facility March 2022 3.8% 76.0
 —% —
Total credit facilities     76.0
   —
           
Term Loans          
CDW UK term loan(1)
 August 2021 2.3% 66.5
 2.3% 65.0
Senior secured term loan facility August 2023 4.3% 1,449.4
 4.1% 1,453.2
Total term loans     1,515.9
   1,518.2
           
Unsecured Senior Notes          
Senior notes due 2023 ("2023 Senior Notes") September 2023 5.0% 525.0
 5.0% 525.0
Senior notes due 2024 ("2024 Senior Notes") December 2024 5.5% 575.0
 5.5% 575.0
Senior notes due 2025 ("2025 Senior Notes") September 2025 5.0% 600.0
 5.0% 600.0
Total unsecured senior notes     1,700.0
   1,700.0
           
Other long-term obligations     8.5
   8.3
Unamortized deferred financing fees     (17.0)   (17.9)
Current maturities of long-term debt     (25.7)   (25.3)
Total long-term debt     $3,257.7
   $3,183.3
(1)The Senior secured term loan facility has a variable interest rate, which has effectively been capped through the use of an interest rate cap (see Note 5 (Financial Instruments)). The interest rate disclosed represents the variable interest rate in effect as of December 31, 2017.British pound-denominated debt facilities.
Senior Secured Asset-based Revolving Credit Facility ("Revolving Loan")
As of June 30, 2018,March 31, 2019, the Company had no outstanding borrowingsis in compliance with the covenants under the various credit agreements and indentures.
Credit Facilities
The Company has a variable rate CDW UK revolving credit facility that is denominated in British pounds. As of March 31, 2019, the Company could have borrowed up to an additional £50 million ($65 million at March 31, 2019) under the CDW UK revolving credit facility.
The Company also has a variable rate senior secured asset-based revolving credit facility (the "Revolving Loan") that is denominated in US dollars. The Revolving Loan is used by the Company for borrowings, issuances of letters of credit and floorplan financing. As of March 31, 2019, the Revolving Loan had less than $1 million of undrawn letters of credit, $357$436 million reserved for the floorplan sub-facility and a borrowing base of $1.8 billion, which is based on the amount of eligible inventory and accounts receivable balances as of May 31, 2018. Borrowings under the Revolving Loan are limited by the borrowing base.February 28, 2019. As of June 30, 2018,March 31, 2019, the Company could have borrowed up to an additional $1.1 billion$938 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.

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.

During the six months ended June 30, 2017, the Company amended, extended and increased its prior revolving loan ("Prior Revolving Loan") and recorded a loss on extinguishment of long-term debt of $1 million in the Consolidated Statement of Operations, representing a write-off of a portion of unamortized deferred financing fees. Fees of $4 million related to the Prior Revolving Loan were capitalized as deferred financing fees and are being amortized over the five-year term of the facility on a straight-line basis. These deferred financing fees are recorded in the Other assets line on the Consolidated Balance Sheets.
Senior Secured Term Loan Facility ("Term Loan")

On April 3, 2018, the Company amended the Term Loan, reducing interest margins by 25 basis points. Borrowings under the Term Loan continue to bear interest at either (i) LIBOR plus a margin or (ii) the Alternative 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 a margin. The amended margin is 1.75% for LIBOR borrowings and 0.75% for ABR borrowings effective April 3, 2018. Additionally, the Company amended its covenant on restricted payments, such that the Company is permitted to make restricted payments so long as the total net leverage ratio is less than 3.75:1.00 on a pro forma basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2018, the outstanding principal amount of the Term Loan was $1.5 billion, excluding $3 million of deferred financing fees. Borrowings under the Term Loan are payable quarterly on the last day of each March, June, September and December. The Company is required to pay quarterly principal installments of $4 million with the remaining principal amount payable on the maturity date of August 17, 2023.
During the six months ended June 30, 2017, the Company amended its prior $1.5 billion senior secured term loan facility ("Prior Term Loan Facility") and recorded a loss on extinguishment of long-term debt of $14 million in the Consolidated Statement of Operations. This loss represented the write-off of a portion of the unamortized deferred financing fees 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.
CDW UK Term Loan
As of June 30, 2018, the outstanding principal amount of the CDW UK Term Loan facility ("CDW UK Term Loan") was £56 million ($74 million at June 30, 2018), excluding £1 million ($1 million at June 30, 2018) of deferred financing fees.
Commencing during the quarter ending September 30, 2018, the Company is required to make annual principal installments of £5 million ($7 million at June 30, 2018), 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, 2018, an interest rate of 1.94% was in effect, which represents LIBOR plus a 1.40% margin.
The CDW UK Term Loan also includes a separate £50 million ($66 million at June 30, 2018) revolving credit facility (the "CDW UK Revolving Credit Facility"). As of June 30, 2018, the Company had £10 million ($13 million at June 30, 2018) of outstanding borrowings under the CDW UK Revolving Credit Facility.
5.0% Senior Notes due 2023 ("2023 Senior Notes")
As of June 30, 2018, the outstanding principal amount of the 2023 Senior Notes was $525 million. The 2023 Notes will mature on September 1, 2023 and bear interest at a 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")
As of June 30, 2018, 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")

As of June 30, 2018, 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.
During the six months ended June 30, 2017, the Company completed the issuance of the 2025 Senior Notes at par. The proceeds from the issuance of the 2025 Senior Notes along with cash on hand and proceeds from Revolving Loan borrowings were deposited to redeem all of the then remaining $600 million aggregate principal amount of the 2022 Senior Notes ("2022 Senior Notes"). 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 fees related to the 2022 Senior Notes.
Debt Guarantors, Covenants and Restrictions
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").

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Revolving Loan is collateralized by a first priority interest in inventory (excluding inventory to the extent collateralized under the inventory floorplanfinancing arrangements as described in Note 34 (Inventory Financing Agreements)), deposits and accounts receivable, and by a second priority interest in substantially all US assets.
The Term Loan is collateralized by a second priority interest in substantially all inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 3 (Inventory Financing Agreements)), deposits and accounts receivable and by a first priority interest in substantially all other US assets.
As of June 30, 2018, the Company remained in compliance with the covenants under its various credit agreements. The Term Loan contains negative covenants that, among other things, place restrictions and limitations on the ability of the Guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions, engage in mergers or consolidations or engage in certain transactions with affiliates. As of June 30, 2018, the amount of CDW's restricted payment capacity under the Term Loan was $1.3 billion. The total net leverage ratio was 2.53:1.00 as of June 30, 2018.
Each of the Senior Notes indentures contain negative covenants that, among other things, place restrictions and limitations on the ability of the Guarantors to enter into sale and lease-back transactions, incur additional secured indebtedness and create liens. The indenture governing each of the Senior Notes do not contain any financial covenants.Loans
The CDW UK Term Loanterm loan has a variable interest rate. The Company is required to make annual principal installments of £5 million ($7 million at March 31, 2019), with the remaining principal amount due at the maturity date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 subordinated debt that require, among other things, the maintenance of a minimum net leverage ratio. As of June 30, 2018,March 31, 2019, the amount of restricted payment capacity under the CDW UK term loan was £124 million ($162 million at March 31, 2019).
The senior secured term loan facility (the "Term Loan") has a variable interest rate, which has effectively been capped through the use of interest rate caps (see Note 6 (Financial Instruments)). The interest rate disclosed in the table above represents the variable interest rates in effect for March 31, 2019 and December 31, 2018, respectively. The Company is required to pay quarterly principal installments of $4 million with the remaining principal amount due at the maturity date. As of March 31, 2019, the amount of CDW's restricted payment capacity under the Term Loan was £101 million ($133 million at June 30, 2018).$1.5 billion.
The Term Loan is collateralized by a second priority interest in substantially all inventory (excluding inventory to the extent collateralized under the inventory financing arrangements as described in Note 4 (Inventory Financing Agreements), deposits and accounts receivable, and by a first priority interest in substantially all other US assets.
Unsecured Senior Notes
The 2023 Senior Notes, 2024 Senior Notes and 2025 Senior Notes (collectively, the "Senior Notes") have a fixed interest rate, which is paid semi-annually.
Fair Value


The fair values of the 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. The Senior Notes, Term Loan and the CDW UK Term Loanterm loan are classified as Level 2 within the fair value hierarchy. The carrying value of the Revolving Loan and the CDW UK Revolving Credit Facilityrevolving credit facility approximate fair value if there are outstanding borrowings. As of June 30, 2018, the carrying value of the CDW UK Term Loan 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 fees, wereare as follows:
(in millions) March 31, 2019 December 31, 2018
Fair value $3,358.7
 $3,145.8
Carrying value 3,300.4
 3,226.5
(in millions) June 30, 2018 December 31, 2017
Fair value $3,263.9
 $3,366.5
Carrying value 3,259.9
 3,255.9

7.    8.    Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. The Tax Cuts and Jobs Act changes several aspects of US federal tax law including: reducing the US corporate income tax rate from 35.0% to 21.0% beginning on January 1, 2018; a one-time tax on the deemed mandatory repatriation of the Company's unremitted foreign earnings which have not been subject to US tax; imposing a minimum US tax on foreign earnings; providing for the immediate expensing of certain qualified property; and changing the tax treatment of performance-based executive compensation and certain employee fringe benefits.
The SEC issued Staff Accounting Bulletin 118 allowing for provisional amounts to be recorded during a measurement period not to exceed one year. The Company recorded during the year ended December 31, 2017 provisional amounts for the impact of revaluing deferred tax assets and liabilities, the deemed mandatory repatriation tax on the Company's unremitted foreign earnings and the state income tax effects from the change in federal tax law during the year ended December 31, 2017. The Company did not adjust any of the provisional amounts during the three or six months ended June 30, 2018. The Company continues to analyze the income tax effects of the Tax Cuts and Jobs Act, as well as monitor guidance from the Internal Revenue Service, US Treasury Department and state taxing authorities and will adjust the provisional amounts within the one-year measurement period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense was $57$39 million for the three months ended June 30, 2018, compared to $54 million for the same period of the prior year.March 31, 2019 and 2018. The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 24.7%20.2% for the three months ended June 30, 2018March 31, 2019 and differed from the US federal statutory rate of 21.0% primarily due to excess tax benefits on equity-based compensation and a discrete tax benefit of $3 million related to CDW Canada's acquisition of Scalar, partially offset by state and local income taxes. The effective tax rate for the same period of the prior year was 23.4% and differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the same period of the prior year was 27.9% and differed from the US federal statutory rate of 35.0% primarily due to excess tax benefits on equity-based compensation.
Income tax expense was $96 million for the six months ended June 30, 2018, compared to $71 million for the same period of the prior year. The effective income tax rate was 24.1% for the six months ended June 30, 2018 and differed from the US federal statutory rate of 21.0% primarily due to state income taxes partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the same period of the prior year was 26.2% and differed from the US federal statutory rate primarily due to excess tax benefits on equity-based compensation.
8.Stockholders' Equity
On February 14, 2018,9.    Leases
The Company has operating leases primarily for real estate, data centers and equipment. Lease terms range from 1 year to 16 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Consolidated Balance Sheet information related to the Company's operating leases is as follows:
(in millions) Classification on the Consolidated Balance Sheets March 31, 2019
Assets    
  Operating lease right-of-use assets $132.1
     
Liabilities    
Current Accrued expenses and other current liabilities - Other $77.1
Long-term Long-term operating lease liabilities 93.0
Total lease liabilities   $170.1
     
Lease term and Discount Rate March 31, 2019
Weighted average remaining lease term (years) 4.5
Weighted average discount rate 3.32%


The components of operating lease expense are as follows:
(in millions)
Financial statement line item
 Three months ended March 31, 2019
Cost of sales $2.7
Selling and administrative expenses 7.6
Total lease cost $10.3


Maturities of operating lease liabilities is as follows:
(in millions) Three months ended March 31, 2019
Remainder of 2019 $73.6
2020 31.1
2021 21.8
2022 14.5
2023 11.4
Thereafter 37.2
Total lease payments $189.6
Less: Interest (19.5)
Present value of lease liabilities $170.1


Supplemental cash flow information related to leases is as follows:
(in millions) Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities  
Operating cash flows from operating leases $10.2
Right-of-use assets obtained in exchange for lease obligations  
Operating leases $49.0


As of March 31, 2019, the Company retired 109,207 shareshas an additional operating lease commitment that has not yet commenced of its treasury stock. On December 31, 2017 the shares were acquired in satisfaction$91 million. This operating lease will commence between 2020 and 2021 with a lease term of withholding taxes which were paid by the Company on behalf of coworkers under the Performance Share Awards program.16 years.

14
9.Equity-Based Compensation
On December 31, 2017, 321,880 Performance Share Units ("PSUs") under the 2013 Long-Term Incentive Plan vested, representing a vesting rate for the 2015-2017 performance period
Table of 192.0% of target. The PSUs had a weighted-average grant-date fair value of $37.84 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, 2018 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 $9 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, 2018.Contents

CDW CORPORATION AND SUBSIDIARIES
On December 31, 2016, 748,855 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.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Stockholders' Equity for the six months ended June 30, 2017.

10.
Earnings perPer 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of basic weighted-average shares outstanding to diluted weighted-average shares outstanding is as follows:
 Three Months Ended March 31,
(in millions)2019 2018
Basic weighted-average shares outstanding147.0
 152.2
Effect of dilutive securities(1)
2.2
 2.6
Diluted weighted-average shares outstanding(2)
149.2
 154.8
 Three Months Ended June 30, Six Months Ended June 30,
(in millions)2018 2017 2018 2017
Basic weighted-average shares outstanding151.6
 156.0
 151.9
 157.7
Effect of dilutive securities(1)
2.3
 3.0
 2.5
 3.2
Diluted weighted-average shares outstanding(2)
153.9
 159.0
 154.4
 160.9

(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 fewer than 0.20.1 million potential common shares excluded from diluted weighted-average shares outstanding for both the three and six months ended June 30,March 31, 2019 and 2018 and 2017 as their inclusion would have had an anti-dilutive effect.
11.    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.
As of June 30, 2018,March 31, 2019, 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.
Segment Information
The Company has three reportable segments: Corporate, which is comprised primarily of US private sector business customers with more than 250 employees, Small Business, which primarily servicingserves US 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. The Company has two other operating segments: CDW UK and CDW Canada, both of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category ("Other"). Headquarters function costs that are not allocated to the segments are included under the heading of "Headquarters" in the tables below.
Information aboutDuring the Company'sfirst quarter of 2019, the Company evaluated its methodology for allocating certain depreciation and amortization expenses to each of its segments. The evaluation resulted in a revision to the allocation of depreciation and amortization expenses from Headquarters to the Company’s reportable segments, is as follows:effective January 1, 2019. The prior period results have been recast to reflect these changes and present comparable information.

(in millions)
Corporate Small Business
Public
Other
Headquarters
Total
Three Months Ended June 30, 2018

  







Net sales
$1,733.8
 $329.5

$1,635.4

$487.4

$—

$4,186.1
Income (loss) from operations
141.3
 24.6

113.0

21.7

(35.1)
265.5
Depreciation and amortization expense
(20.4) (5.2)
(11.3)
(9.0)
(20.4)
(66.3)



  







Three Months Ended June 30, 2017(1)


  







Net sales
$1,580.1
 $315.0
 $1,632.8
 $363.8
 $—

$3,891.7
Income (loss) from operations
126.9
 19.4
 104.6
 12.5
 (32.6)
230.8
Depreciation and amortization expense
(20.8) (5.1) (11.2) (7.6) (20.7)
(65.4)

(in millions) Corporate Small Business Public Other Headquarters Total
Six Months Ended June 30, 2018            
Net sales $3,299.6
 $657.1
 $2,865.4
 $970.4
 $—
 $7,792.5
Income (loss) from operations 266.1
 46.9
 184.7
 41.5
 (69.6) 469.6
Depreciation and amortization expense (41.5) (10.4) (22.5) (17.8) (40.7) (132.9)
             
Six Months Ended June 30, 2017(1)
            
Net sales $3,020.7
 $607.0
 $2,786.5
 $733.4
 $—
 $7,147.6
Income (loss) from operations 239.0
 36.0
 165.3
 25.1
 (63.9) 401.5
Depreciation and amortization expense (41.7) (10.3) (22.4) (14.6) (40.5) (129.5)

(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Information about the Company's segments is as follows:
(in millions) Corporate Small Business Public Other Headquarters Total
Three Months Ended March 31, 2019            
Net sales $1,736.2
 $355.6
 $1,330.7
 $535.4
 $—
 $3,957.9
Operating income (loss) 134.7
 24.4
 76.1
 25.6
 (31.9) 228.9
Depreciation and amortization expense (21.5) (5.6) (12.7) (7.4) (17.1) (64.3)
             
Three Months Ended March 31, 2018            
Net sales $1,565.8
 $327.6
 $1,230.0
 $483.0
 $—
 $3,606.4
Operating income (loss) 123.0
 21.9
 70.2
 19.8
 (30.8) 204.1
Depreciation and amortization expense (22.9) (5.6) (12.7) (8.8) (16.6) (66.6)


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Geographic Areas and Revenue Mix
Three Months Ended June 30, 2018Three Months Ended March 31, 2019
Corporate Small Business Public Other Total
(in millions)Corporate Small Business Public Other Total
Geography(1)

 
 
 
 
         
United States$1,731.4
 $329.5
 $1,635.4
 $8.0
 $3,704.3
$1,732.9
 $355.6
 $1,330.7
 $8.4
 $3,427.6
Rest of World2.4
 —
 —
 479.4
 481.8
3.3
 —
 —
 527.0
 530.3
Total Net sales1,733.8
 329.5
 1,635.4
 487.4
 4,186.1
1,736.2
 355.6
 1,330.7
 535.4
 3,957.9
                 
Major Product and Services                 
Hardware1,380.8
 273.9
 1,337.8
 389.7
 3,382.2
1,383.9
 295.0
 1,063.1
 395.9
 3,137.9
Software254.2
 42.6
 255.8
 53.1
 605.7
247.4
 48.3
 221.0
 77.2
 593.9
Services81.3
 7.7
 37.6
 42.2
 168.8
88.1
 7.0
 42.3
 59.2
 196.6
Other(2)
17.5
 5.3
 4.2
 2.4
 29.4
16.8
 5.3
 4.3
 3.1
 29.5
Total Net sales1,733.8
 329.5
 1,635.4
 487.4
 4,186.1
1,736.2
 355.6
 1,330.7
 535.4
 3,957.9
                 
Sales by Channel                 
Corporate1,733.8
 —
 —
 —
 1,733.8
1,736.2
 —
 —
 —
 1,736.2
Small Business—
 329.5
 —
 —
 329.5
—
 355.6
 —
 —
 355.6
Government—
 —
 493.5
 —
 493.5
—
 —
 488.4
 —
 488.4
Education—
 —
 712.1
 —
 712.1
—
 —
 400.4
 —
 400.4
Healthcare—
 —
 429.8
 —
 429.8
—
 —
 441.9
 —
 441.9
Other—
 —
 —
 487.4
 487.4
—
 —
 —
 535.4
 535.4
Total Net sales1,733.8
 329.5
 1,635.4
 487.4
 4,186.1
1,736.2
 355.6
 1,330.7
 535.4
 3,957.9
                 
Timing of Revenue Recognition                 
Transferred at a point in time where CDW is principal1,583.4
 309.6
 1,537.3
 441.6
 3,871.9
1,581.8
 335.2
 1,243.3
 474.9
 3,635.2
Transferred at a point in time where CDW is agent101.5
 17.1
 55.3
 9.7
 183.6
104.0
 19.8
 46.2
 13.0
 183.0
Transferred over time where CDW is principal48.9
 2.8
 42.8
 36.1
 130.6
50.4
 0.6
 41.2
 47.5
 139.7
Total Net sales$1,733.8
 $329.5
 $1,635.4
 $487.4
 $4,186.1
$1,736.2
 $355.6
 $1,330.7
 $535.4
 $3,957.9
(1)Net sales by geography is generally based on the ship-to address with the exception of certain services that may be performed at, or on behalf of, multiple locations. Such service arrangements are categorized based on the bill-to address.
(2)Includes items such as delivery charges to customers.






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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
Three Months Ended June 30, 2017(1)
 Corporate Small Business Public Other Total
Geography(2)
         
United States$1,578.5
 $315.0
 $1,632.8
 $7.1
 $3,533.4
Rest of World1.6
 —
 —
 356.7
 358.3
Total Net sales1,580.1
 315.0
 1,632.8
 363.8
 3,891.7
          
Major Product and Services         
Hardware1,238.5
 261.0
 1,329.7
 291.4
 3,120.6
Software243.5
 42.5
 263.9
 39.8
 589.7
Services81.3
 6.2
 34.7
 30.6
 152.8
Other(3)
16.8
 5.3
 4.5
 2.0
 28.6
Total Net sales1,580.1
 315.0
 1,632.8
 363.8
 3,891.7
          
Sales by Channel         
Corporate1,580.1
 —
 —
 —
 1,580.1
Small Business—
 315.0
 —
 —
 315.0
Government—
 —
 523.4
 —
 523.4
Education—
 —
 704.9
 —
 704.9
Healthcare—
 —
 404.5
 —
 404.5
Other—
 —
 —
 363.8
 363.8
Total Net sales1,580.1
 315.0
 1,632.8
 363.8
 3,891.7
          
Timing of Revenue Recognition         
Transferred at a point in time where CDW is principal1,437.9
 296.7
 1,539.3
 325.6
 3,599.5
Transferred at a point in time where CDW is agent92.6
 16.0
 52.1
 6.9
 167.6
Transferred over time where CDW is principal49.6
 2.3
 41.4
 31.3
 124.6
Total Net sales$1,580.1
 $315.0
 $1,632.8
 $363.8
 $3,891.7
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Net sales by geography is generally based on the ship-to address with the exception of certain services that may be performed at, or on behalf of, multiple locations. Such service arrangements are categorized based on the bill-to address.
(3)Includes items such as delivery charges to customers.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2018Three Months Ended March 31, 2018
Corporate Small Business Public Other Total
(in millions)Corporate Small Business Public Other Total
Geography(1)
                  
United States$3,295.8
 $657.1
 $2,865.4
 $17.2
 $6,835.5
$1,564.4
 $327.6
 $1,230.0
 $9.2
 $3,131.2
Rest of World3.8
 —
 —
 953.2
 957.0
1.4
 —
 —
 473.8
 475.2
Total Net sales3,299.6
 657.1
 2,865.4
 970.4
 7,792.5
1,565.8
 327.6
 1,230.0
 483.0
 3,606.4
        
         
Major Product and Services        
         
Hardware2,632.4
 546.7
 2,346.0
 769.2
 6,294.3
1,250.3
 273.1
 1,007.0
 381.1
 2,911.5
Software473.8
 85.7
 438.9
 112.4
 1,110.8
219.6
 42.8
 184.3
 57.3
 504.0
Services159.4
 14.0
 72.2
 84.4
 330.0
79.3
 6.3
 34.6
 42.7
 162.9
Other(2)
34.0
 10.7
 8.3
 4.4
 57.4
16.6
 5.4
 4.1
 1.9
 28.0
Total Net sales3,299.6
 657.1
 2,865.4
 970.4
 7,792.5
1,565.8
 327.6
 1,230.0
 483.0
 3,606.4
        
         
Sales by Channel        
         
Corporate3,299.6
 —
 —
 —
 3,299.6
1,565.8
 —
 —
 —
 1,565.8
Small Business—
 657.1
 —
 —
 657.1
—
 327.6
 —
 —
 327.6
Government—
 —
 912.0
 —
 912.0
—
 —
 418.5
 —
 418.5
Education—
 —
 1,109.3
 —
 1,109.3
—
 —
 397.2
 —
 397.2
Healthcare—
 —
 844.1
 —
 844.1
—
 —
 414.3
 —
 414.3
Other—
 —
 —
 970.4
 970.4
—
 —
 —
 483.0
 483.0
Total Net sales3,299.6
 657.1
 2,865.4
 970.4
 7,792.5
1,565.8
 327.6
 1,230.0
 483.0
 3,606.4
        
         
Timing of Revenue Recognition        
         
Transferred at a point in time where CDW is principal3,009.7
 619.0
 2,681.2
 874.6
 7,184.5
1,426.3
 309.4
 1,171.4
 433.0
 3,340.1
Transferred at a point in time where CDW is agent194.2
 33.6
 96.4
 24.8
 349.0
92.7
 16.5
 41.1
 15.1
 165.4
Transferred over time where CDW is principal95.7
 4.5
 87.8
 71.0
 259.0
46.8
 1.7
 17.5
 34.9
 100.9
Total Net sales$3,299.6
 $657.1
 $2,865.4
 $970.4
 $7,792.5
$1,565.8
 $327.6
 $1,230.0
 $483.0
 $3,606.4
(1)Net sales by geography is generally based on the ship-to address with the exception of certain services that may be performed at, or on behalf of, multiple locations. Such service arrangements are categorized based on the bill-to address.
(2)Includes items such as delivery charges to customers.














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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
Six Months Ended June 30, 2017 (1)
 Corporate Small Business Public Other Total
Geography(2)
         
United States3,018.1
 $607.0
 $2,786.5
 $13.2
 $6,424.8
Rest of World2.6
 —
 —
 720.2
 $722.8
Total Net sales3,020.7
 607.0
 2,786.5
 733.4
 7,147.6
          
Major Product and Services         
Hardware2,385.9
 501.7
 2,288.3
 584.8
 5,760.7
Software444.5
 82.5
 426.7
 82.9
 1,036.6
Services157.1
 12.5
 62.7
 61.9
 294.2
Other(3)
33.2
 10.3
 8.8
 3.8
 56.1
Total Net sales3,020.7
 607.0
 2,786.5
 733.4
 7,147.6
          
Sales by Channel         
Corporate3,020.7
 —
 —
 —
 3,020.7
Small Business—
 607.0
 —
 —
 607.0
Government—
 —
 898.1
 —
 898.1
Education—
 —
 1,098.1
 —
 1,098.1
Healthcare—
 —
 790.3
 —
 790.3
Other—
 —
 —
 733.4
 733.4
Total Net sales3,020.7
 607.0
 2,786.5
 733.4
 7,147.6
          
Timing of Revenue Recognition         
Transferred at a point in time where CDW is principal2,752.2
 572.4
 2,619.7
 656.9
 6,601.2
Transferred at a point in time where CDW is agent173.8
 29.9
 89.6
 15.1
 308.4
Transferred over time where CDW is principal94.7
 4.7
 77.2
 61.4
 238.0
Total Net sales$3,020.7
 $607.0
 $2,786.5
 $733.4
 $7,147.6
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Net sales by geography is generally based on the ship-to address with the exception of certain services that may be performed at, or on behalf of, multiple locations. Such service arrangements are categorized based on the bill-to address.
(3)Includes items such as delivery charges to customers.





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table presents Net sales by major category for the three and six months ended June 30, 2018March 31, 2019 and 2017.2018. Categories are based upon internal classifications.

 Three Months Ended June 30,
 2018 
2017(1)
 Dollars in
Millions		 Percentage
of Total Net
Sales		 Dollars in
Millions		 Percentage
of Total Net
Sales
Notebooks/Mobile Devices$1,068.3
 25.5% $912.8
 23.5%
Netcomm Products498.6
 11.9
 540.3
 13.9
Desktops345.3
 8.2
 308.6
 7.9
Video325.8
 7.8
 289.5
 7.4
Enterprise and Data Storage (Including Drives)264.5
 6.3
 291.3
 7.5
Other Hardware879.7
 21.1
 778.1
 20.0
Total Hardware3,382.2
 80.8
 3,120.6
 80.2
        
Software(2)
605.7
 14.5
 589.7
 15.2
Services(2)
168.8
 4.0
 152.8
 3.9
Other(3)
29.4
 0.7
 28.6
 0.7
Total Net sales$4,186.1
 100.0% $3,891.7
 100.0%

Six Months Ended June 30,Three Months Ended March 31,
2018 
2017(1)
2019 2018
Dollars in
Millions		 Percentage
of Total Net
Sales		 Dollars in
Millions		 Percentage
of Total Net
Sales		Dollars in
Millions		 Percentage
of Total Net
Sales		 Dollars in
Millions		 Percentage
of Total Net
Sales
Notebooks/Mobile Devices$1,927.0
 24.7% $1,647.1
 23.0%$977.1
 24.7% $865.9
 24.0%
Netcomm Products981.5
 12.6
 999.2
 14.0
512.3
 12.9
 487.3
 13.5
Desktops648.8
 8.3
 571.5
 8.0
303.7
 7.7
 310.8
 8.6
Enterprise and Data Storage (Including Drives)290.6
 7.3
 250.1
 7.0
Video585.0
 7.5
 525.0
 7.3
271.8
 6.9
 260.8
 7.2
Enterprise and Data Storage (Including Drives)520.5
 6.7
 525.7
 7.4
Other Hardware1,631.5
 21.0
 1,492.2
 20.9
782.4
 19.8
 736.6
 20.4
Total Hardware6,294.3
 80.8
 5,760.7
 80.6
3,137.9
 79.3
 2,911.5
 80.7
              
Software(2)(1)
1,110.8
 14.3
 1,036.6
 14.5
593.9
 15.0
 504.0
 14.0
Services(2)(1)
330.0
 4.2
 294.2
 4.1
196.6
 5.0
 162.9
 4.5
Other(3)(2)
57.4
 0.7
 56.1
 0.8
29.5
 0.7
 28.0
 0.8
Total Net sales$7,792.5

100.0%
$7,147.6

100.0%$3,957.9

100.0%
$3,606.4

100.0%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Certain software and services revenues are recorded on a net basis for accounting purposes. As a result, the category percentage of net revenues is not representative of the category percentage of gross profits.
(3)(2)Includes items such as delivery charges to customers.






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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.    Supplemental Guarantor Information
The 2023 Senior Notes, the 2024 Senior Notes and the 2025 Senior Notes are guaranteed by the Parent and each of CDW LLC’sLLC'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 are subject to certain customary release provisions contained in the indentures governing the 2023 Senior Notes, the 2024 Senior Notes and the 2025 Senior Notes. 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.Senior Notes. 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, 2018March 31, 2019 and December 31, 2017,2018, Consolidating Statements of Operations for the three and six months ended June 30,March 31, 2019 and 2018, and 2017, Condensed Consolidating Statements of Comprehensive Income for the three and six months ended June 30,March 31, 2019 and 2018, and 2017 and Condensed Consolidating Statements of Cash Flows for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, 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 combined accounts of the Non-Guarantor Subsidiaries, and the accounts of CDW Finance Corporation (the "Co-Issuer") for the periods indicated. The information wasis prepared on the same basis as the Company's Consolidated Financial Statements.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Balance Sheet
June 30, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Assets             
Current assets:             
Cash and cash equivalents$—
 $70.9
 $—
 $52.4
 $—
 $(22.6) $100.7
Accounts receivable, net—
 —
 2,263.8
 348.4
 —
 —
 2,612.2
Merchandise inventory—
 —
 502.2
 74.7
 —
 —
 576.9
Miscellaneous receivables—
 114.5
 244.1
 15.2
 —
 —
 373.8
Prepaid expenses and other—
 20.4
 120.6
 40.1
 —
 —
 181.1
Total current assets—
 205.8
 3,130.7
 530.8
 —
 (22.6) 3,844.7
Property and equipment, net—
 85.9
 40.7
 23.7
 —
 —
 150.3
Goodwill—
 751.8
 1,439.0
 281.7
 —
 —
 2,472.5
Other intangible assets, net—
 273.6
 353.1
 175.6
 —
 —
 802.3
Other assets1.5
 69.6
 159.2
 1.2
 —
 (171.2) 60.3
Investment in and advances to subsidiaries1,067.4
 3,158.6
 —
 —
 —
 (4,226.0) —
Total Assets$1,068.9
 $4,545.3
 $5,122.7
 $1,013.0
 $—
 $(4,419.8) $7,330.1
Liabilities and Stockholders’ Equity             
Current liabilities:             
Accounts payable-trade$—
 $31.9
 $1,460.9
 $223.4
 $—
 $(22.6) $1,693.6
Accounts payable-inventory financing—
 0.1
 380.1
 7.4
 —
 —
 387.6
Current maturities of
long-term debt
—
 14.9
 3.8
 19.9
 —
 —
 38.6
Contract liabilities—
 —
 87.4
 82.5
 —
 —
 169.9
Accrued expenses and other current liabilities—
 186.6
 276.6
 67.1
 —
 —
 530.3
Total current liabilities—
 233.5
 2,208.8
 400.3
 —
 (22.6) 2,820.0
Long-term liabilities:             
Debt—
 3,127.2
 8.3
 66.2
 —
 —
 3,201.7
Deferred income taxes—
 67.6
 78.3
 28.5
 —
 (1.5) 172.9
Other liabilities—
 49.6
 4.3
 182.4
 —
 (169.7) 66.6
Total long-term liabilities—
 3,244.4
 90.9
 277.1
 —
 (171.2) 3,441.2
Total stockholders' equity1,068.9
 1,067.4
 2,823.0
 335.6
 —
 (4,226.0) 1,068.9
Total Liabilities and Stockholders' Equity$1,068.9
 $4,545.3
 $5,122.7
 $1,013.0
 $—
 $(4,419.8) $7,330.1




28
Condensed Consolidating Balance Sheet
March 31, 2019
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Assets             
Current assets:             
Cash and cash equivalents$—
 $195.2
 $—
 $97.8
 $—
 $(8.0) $285.0
Accounts receivable, net—
 —
 2,283.4
 441.7
 —
 —
 2,725.1
Merchandise inventory—
 —
 516.2
 74.5
 —
 —
 590.7
Miscellaneous receivables—
 105.5
 230.3
 17.6
 —
 —
 353.4
Prepaid expenses and other—
 18.5
 99.2
 60.6
 —
 —
 178.3
Total current assets—
 319.2
 3,129.1
 692.2
 —
 (8.0) 4,132.5
Operating lease right-of-use assets—
 22.9
 77.2
 32.0
 —
 —
 132.1
Property and equipment, net—
 76.5
 53.2
 25.5
 —
 —
 155.2
Goodwill—
 751.8
 1,437.8
 338.6
 —
 —
 2,528.2
Other intangible assets, net—
 245.3
 267.3
 183.4
 —
 —
 696.0
Other assets1.3
 38.7
 8.0
 226.8
 —
 (239.3) 35.5
Investment in and advances to subsidiaries926.0
 3,071.9
 —
 —
 —
 (3,997.9) —
Total Assets$927.3
 $4,526.3
 $4,972.6
 $1,498.5
 $—
 $(4,245.2) $7,679.5
Liabilities and Stockholders' Equity             
Current liabilities:             
Accounts payable-trade$—
 $24.3
 $1,452.2
 $276.9
 $—
 $(8.0) $1,745.4
Accounts payable-inventory financing—
 0.3
 474.7
 25.0
 —
 —
 500.0
Current maturities of long-term debt—
 14.9
 4.2
 6.6
 —
 —
 25.7
Contract liabilities—
 —
 98.2
 93.9
 —
 —
 192.1
Accrued expenses and other current liabilities—
 253.2
 397.0
 101.6
 —
 —
 751.8
Total current liabilities—
 292.7
 2,426.3
 504.0
 —
 (8.0) 3,215.0
Long-term liabilities:             
Debt—
 3,194.4
 4.3
 59.0
 —
 —
 3,257.7
Deferred income taxes—
 50.4
 50.5
 33.1
 —
 (1.3) 132.7
Operating lease liabilities—
 34.7
 30.3
 28.0
 —
 —
 93.0
Other liabilities—
 28.1
 2.1
 261.6
 —
 (238.0) 53.8
Total long-term liabilities—
 3,307.6
 87.2
 381.7
 —
 (239.3) 3,537.2
Total stockholders' equity927.3
 926.0
 2,459.1
 612.8
 —
 (3,997.9) 927.3
Total Liabilities and Stockholders' Equity$927.3
 $4,526.3
 $4,972.6
 $1,498.5
 $—
 $(4,245.2) $7,679.5




21
Table of Contents
CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Condensed Consolidating Balance Sheet
December 31, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Assets             
Current assets:             
Cash and cash equivalents$—
 $176.0
 $—
 $46.7
 $—
 $(16.9) $205.8
Accounts receivable, net—
 —
 2,331.2
 340.0
 —
 —
 2,671.2
Merchandise inventory—
 —
 387.4
 66.9
 —
 —
 454.3
Miscellaneous receivables—
 110.6
 187.7
 18.1
 —
 —
 316.4
Prepaid expenses and other—
 17.1
 93.8
 38.2
 —
 —
 149.1
Total current assets—
 303.7
 3,000.1
 509.9
 —
 (16.9) 3,796.8
Property and equipment, net—
 82.3
 52.0
 21.8
 —
 —
 156.1
Goodwill—
 751.8
 1,437.8
 273.2
 —
 —
 2,462.8
Other intangible assets, net—
 252.5
 300.0
 159.7
 —
 —
 712.2
Other assets1.4
 49.8
 9.6
 140.2
 —
 (161.2) 39.8
Investment in and advances to subsidiaries973.8
 3,028.9
 —
 —
 —
 (4,002.7) —
Total Assets$975.2
 $4,469.0
 $4,799.5
 $1,104.8
 $—
 $(4,180.8) $7,167.7
Liabilities and Stockholders' Equity             
Current liabilities:             
Accounts payable-trade$—
 $39.2
 $1,387.9
 $166.9
 $—
 $(16.9) $1,577.1
Accounts payable-inventory financing—
 0.2
 406.1
 23.0
 —
 —
 429.3
Current maturities of long-term debt—
 14.9
 4.0
 6.4
 —
 —
 25.3
Contract liabilities—
 —
 95.6
 82.7
 —
 —
 178.3
Accrued expenses and other current liabilities—
 217.6
 306.7
 68.8
 —
 —
 593.1
Total current liabilities—
 271.9
 2,200.3
 347.8
 —
 (16.9) 2,803.1
Long-term liabilities:             
Debt—
 3,121.3
 4.3
 57.7
 —
 —
 3,183.3
Deferred income taxes—
 55.9
 60.5
 26.9
 —
 (1.4) 141.9
Other liabilities—
 46.1
 5.7
 172.2
 —
 (159.8) 64.2
Total long-term liabilities—
 3,223.3
 70.5
 256.8
 —
 (161.2) 3,389.4
Total stockholders' equity975.2
 973.8
 2,528.7
 500.2
 —
 (4,002.7) 975.2
Total Liabilities and Stockholders' Equity$975.2
 $4,469.0
 $4,799.5
 $1,104.8
 $—
 $(4,180.8) $7,167.7

Condensed Consolidating Balance Sheet
December 31, 2017
 (as adjusted)
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Assets             
Current assets:             
Cash and cash equivalents$—
 $113.7
 $—
 $32.4
 $—
 $(1.9) $144.2
Accounts receivable, net—
 —
 2,015.7
 313.6
 —
 —
 2,329.3
Merchandise inventory—
 —
 354.6
 56.9
 —
 —
 411.5
Miscellaneous receivables—
 103.9
 211.1
 28.0
 —
 —
 343.0
Prepaid expenses and other—
 18.0
 100.4
 49.9
 —
 —
 168.3
Total current assets—
 235.6
 2,681.8
 480.8
 —
 (1.9) 3,396.3
Property and equipment, net—
 95.0
 43.5
 22.6
 —
 —
 161.1
Goodwill—
 751.8
 1,439.0
 288.8
 —
 —
 2,479.6
Other intangible assets, net—
 280.1
 424.5
 192.4
 —
 —
 897.0
Other assets1.7
 30.7
 209.3
 2.6
 —
 (211.6) 32.7
Investment in and advances to subsidiaries983.9
 3,066.1
 —
 —
 —
 (4,050.0) —
Total Assets$985.6
 $4,459.3
 $4,798.1
 $987.2
 $—
 $(4,263.5) $6,966.7
Liabilities and Stockholders' Equity             
Current liabilities:             
Accounts payable-trade$—
 $42.5
 $1,112.1
 $165.0
 $—
 $(1.9) $1,317.7
Accounts payable-inventory financing—
 1.0
 480.9
 16.1
 —
 —
 498.0
Current maturities of long-term debt—
 14.9
 3.8
 6.8
 —
 —
 25.5
Contract liabilities—
 —
 87.5
 71.3
 —
 —
 158.8
Accrued expenses and other current liabilities—
 173.3
 262.0
 86.8
 —
 —
 522.1
Total current liabilities—
 231.7
 1,946.3
 346.0
 —
 (1.9) 2,522.1
Long-term liabilities:             
Debt—
 3,134.2
 8.3
 67.5
 —
 —
 3,210.0
Deferred income taxes—
 66.5
 100.1
 31.4
 —
 (1.7) 196.3
Other liabilities—
 43.0
 4.7
 214.9
 —
 (209.9) 52.7
Total long-term liabilities—
 3,243.7
 113.1
 313.8
 —
 (211.6) 3,459.0
Total stockholders' equity985.6
 983.9
 2,738.7
 327.4
 —
 (4,050.0) 985.6
Total Liabilities and Stockholders' Equity$985.6
 $4,459.3
 $4,798.1
 $987.2
 $—
 $(4,263.5) $6,966.7












2922
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Consolidating Statement of Operations
Three Months Ended March 31, 2019
(in millions)Parent
Guarantor		 Subsidiary
Issuer		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Co-Issuer Consolidating
Adjustments		 Consolidated
Net sales$—
 $—
 $3,422.5
 $535.4
 $—
 $—
 $3,957.9
Cost of sales—
 —
 2,840.8
 445.0
 —
 —
 3,285.8
Gross profit—
 —
 581.7
 90.4
 —
 —
 672.1
Selling and administrative expenses—
 31.9
 309.4
 62.7
 —
 —
 404.0
Advertising expense—
 —
 37.1
 2.1
 —
 —
 39.2
Operating income (loss)—
 (31.9) 235.2
 25.6
 —
 —
 228.9
Interest (expense) income, net—
 (38.0) 0.1
 (0.4) —
 —
 (38.3)
Other income (expense), net—
 —
 1.7
 (0.7) —
 —
 1.0
Income (loss) before income taxes—
 (69.9) 237.0
 24.5
 —
 —
 191.6
Income tax (expense) benefit(0.1) 26.4
 (59.4) (5.6) —
 —
 (38.7)
Income (loss) before equity in earnings of subsidiaries(0.1) (43.5) 177.6
 18.9
 —
 —
 152.9
Equity in earnings of subsidiaries153.0
 196.5
 —
 —
 —
 (349.5) —
Net income$152.9
 $153.0
 $177.6
 $18.9
 $—
 $(349.5) $152.9

Consolidating Statement of Operations
Three Months Ended June 30, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Net sales$—
 $—
 $3,698.7
 $487.4
 $—
 $—
 $4,186.1
Cost of sales—
 —
 3,083.0
 407.5
 —
 —
 3,490.5
Gross profit—
 —
 615.7
 79.9
 —
 —
 695.6
Selling and administrative expenses—
 35.1
 289.6
 56.7
 —
 —
 381.4
Advertising expense—
 —
 47.2
 1.5
 —
 —
 48.7
Income (loss) from operations—
 (35.1) 278.9
 21.7
 —
 —
 265.5
Interest (expense) income, net—
 (36.7) 0.9
 (1.4) —
 —
 (37.2)
Other income—
 —
 0.1
 1.4
 —
 —
 1.5
Income (loss) before income taxes—
 (71.8) 279.9
 21.7
 —
 —
 229.8
Income tax (expense) benefit(0.1) 20.2
 (72.0) (4.9) —
 —
 (56.8)
Income (loss) before equity in earnings of subsidiaries(0.1) (51.6) 207.9
 16.8
 —
 —
 173.0
Equity in earnings of subsidiaries173.1
 224.7
 —
 —
 —
 (397.8) —
Net income$173.0
 $173.1
 $207.9
 $16.8
 $—
 $(397.8) $173.0










































3023
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Consolidating Statement of Operations
Three Months Ended June 30, 2017
(as adjusted)
Three Months Ended March 31, 2018Three Months Ended March 31, 2018
(in millions)Parent
Guarantor		 Subsidiary
Issuer		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Co-Issuer Consolidating
Adjustments		 ConsolidatedParent
Guarantor		 Subsidiary
Issuer		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Co-Issuer Consolidating
Adjustments		 Consolidated
Net sales$—
 $—
 $3,528.0
 $363.7
 $—
 $—
 $3,891.7
$—
 $—
 $3,123.4
 $483.0
 $—
 $—
 $3,606.4
Cost of sales—
 —
 2,947.6
 303.3
 —
 —
 3,250.9
—
 —
 2,597.0
 405.5
 —
 —
 3,002.5
Gross profit—
 —
 580.4
 60.4
 —
 —
 640.8
—
 —
 526.4
 77.5
 —
 —
 603.9
Selling and administrative expenses—
 32.6
 284.6
 46.3
 —
 —
 363.5
—
 34.5
 272.4
 55.8
 —
 —
 362.7
Advertising expense—
 —
 44.9
 1.6
 —
 —
 46.5
—
 —
 35.2
 1.9
 —
 —
 37.1
Income (loss) from operations—
 (32.6) 250.9
 12.5
 —
 —
 230.8
Operating income (loss)—
 (34.5) 218.8
 19.8
 —
 —
 204.1
Interest (expense) income, net—
 (35.4) 1.1
 (1.6) —
 —
 (35.9)—
 (37.1) 1.0
 (1.6) —
 —
 (37.7)
Other income—
 —
 0.1
 0.3
 —
 —
 0.4
Other (expense) income, net—
 —
 0.4
 (1.1) —
 —
 (0.7)
Income (loss) before income taxes—
 (68.0) 252.1
 11.2
 —
 —
 195.3
—
 (71.6) 220.2
 17.1
 —
 —
 165.7
Income tax (expense) benefit—
 29.4
 (80.7) (3.1) —
 —
 (54.4)(0.1) 20.8
 (55.3) (4.1) —
 —
 (38.7)
Income (loss) before equity in earnings of subsidiaries—
 (38.6) 171.4
 8.1
 —
 —
 140.9
(0.1) (50.8) 164.9
 13.0
 —
 —
 127.0
Equity in earnings of subsidiaries140.9
 179.5
 —
 —
 —
 (320.4) —
127.1
 177.9
 —
 —
 —
 (305.0) —
Net income$140.9
 $140.9
 $171.4
 $8.1
 $—
 $(320.4) $140.9
$127.0
 $127.1
 $164.9
 $13.0
 $—
 $(305.0) $127.0








































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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Consolidating Statement of Operations
Six Months Ended June 30, 2018
(in millions)Parent
Guarantor		 Subsidiary
Issuer		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Co-Issuer Consolidating
Adjustments		 Consolidated
Net sales$—
 $—
 $6,822.1
 $970.4
 $—
 $—
 $7,792.5
Cost of sales—
 —
 5,680.0
 813.0
 —
 —
 6,493.0
Gross profit—
 —
 1,142.1
 157.4
 —
 —
 1,299.5
Selling and administrative expenses—
 69.6
 562.0
 112.5
 —
 —
 744.1
Advertising expense—
 —
 82.4
 3.4
 —
 —
 85.8
Income (loss) from operations—
 (69.6) 497.7
 41.5
 —
 —
 469.6
Interest (expense) income, net—
 (73.8) 1.9
 (3.0) —
 —
 (74.9)
Other income—
 —
 0.5
 0.3
 —
 —
 0.8
Income (loss) before income taxes—
 (143.4) 500.1
 38.8
 —
 —
 395.5
Income tax (expense) benefit(0.2) 41.0
 (127.3) (9.0) —
 —
 (95.5)
Income (loss) before equity in earnings of subsidiaries(0.2) (102.4) 372.8
 29.8
 —
 —
 300.0
Equity in earnings of subsidiaries300.2
 402.6
 —
 —
 —
 (702.8) —
Net income$300.0
 $300.2
 $372.8
 $29.8
 $—
 $(702.8) $300.0

















Condensed Consolidating Statement of Comprehensive Income
Three Months Ended March 31, 2019
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Comprehensive income$156.0
 $156.1
 $177.6
 $28.8
 $—
 $(362.5) $156.0
32
Condensed Consolidating Statement of Comprehensive Income
Three Months Ended March 31, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Comprehensive income$144.4
 $144.5
 $164.9
 $27.2
 $—
 $(336.6) $144.4








25
Table of Contents
CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Net cash provided by operating activities$—
 $16.9
 $183.2
 $51.2
 $—
 $1.1
 $252.4
Cash flows used in investing activities:             
Capital expenditures—
 (13.0) (4.6) (1.8) —
 —
 (19.4)
Acquisition of business, net of cash acquired—
 —
 —
 (68.7) —
 —
 (68.7)
Net cash used in investing activities—
 (13.0) (4.6) (70.5) —
 —
 (88.1)
Cash flows (used in) provided by financing activities:             
Proceeds from borrowings under revolving credit facility—
 88.5
 —
 —
 —
 —
 88.5
Repayments of borrowings under revolving credit facility—
 (12.5) —
 —
 —
 —
 (12.5)
Repayments of long-term debt—
 (3.7) —
 (2.2) —
 —
 (5.9)
Net change in accounts payable-inventory financing—
 0.1
 68.6
 1.5
 —
 —
 70.2
Repurchases of common stock(177.1) —
 —
 —
 —
 —
 (177.1)
Payment of incentive compensation plan withholding taxes(11.6) —
 —
 —
 —
 —
 (11.6)
Dividend payments(43.4) —
 —
 —
 —
 —
 (43.4)
Capital contributions—
 (76.0) —
 76.0
 —
 —
 —
Other—
 11.6
 —
 —
 —
 —
 11.6
Distributions and advances from (to) affiliates232.1
 7.3
 (247.2) —
 —
 7.8
 —
Net cash (used in) provided by financing activities—
 15.3
 (178.6) 75.3
 —
 7.8
 (80.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash—
 —
 —
 0.8
 —
 —
 0.8
Net increase in cash, cash equivalents and restricted cash—
 19.2
 —
 56.8
 —
 8.9
 84.9
Cash, cash equivalents and restricted cash—beginning of period—
 176.0
 —
 46.7
 —
 (16.9) 205.8
Cash, cash equivalents and restricted cash—end of period$—
 $195.2
 $—
 $103.5
 $—
 $(8.0) $290.7

Consolidating Statement of Operations
Six Months Ended June 30, 2017
(as adjusted)
(in millions)Parent
Guarantor		 Subsidiary
Issuer		 Guarantor
Subsidiaries		 Non-Guarantor
Subsidiaries		 Co-Issuer Consolidating
Adjustments		 Consolidated
Net sales$—
 $—
 $6,414.2
 $733.4
 $—
 $—
 $7,147.6
Cost of sales—
 —
 5,340.5
 612.8
 —
 —
 5,953.3
Gross profit—
 —
 1,073.7
 120.6
 —
 —
 1,194.3
Selling and administrative expenses—
 63.9
 554.5
 92.5
 —
 —
 710.9
Advertising expense—
 —
 78.9
 3.0
 —
 —
 81.9
Income (loss) from operations—
 (63.9) 440.3
 25.1
 —
 —
 401.5
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—
 —
 0.3
 1.0
 —
 —
 1.3
Income (loss) before income taxes—
 (195.8) 442.7
 22.9
 —
 —
 269.8
Income tax (expense) benefit—
 86.6
 (151.3) (6.1) —
 —
 (70.8)
Income (loss) before equity in earnings of subsidiaries—
 (109.2) 291.4
 16.8
 —
 —
 199.0
Equity in earnings of subsidiaries199.0
 308.2
 —
 —
 —
 (507.2) —
Net income$199.0
 $199.0
 $291.4
 $16.8
 $—
 $(507.2) $199.0


















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CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Net cash provided by (used in) operating activities$—
 $(13.8) $239.6
 $10.8
 $—
 $(14.4) $222.2
Cash flows used in investing activities:             
Capital expenditures—
 (11.1) (1.2) (3.6) —
 —
 (15.9)
Net cash used in investing activities—
 (11.1) (1.2) (3.6) —
 —
 (15.9)
Cash flows (used in) provided by financing activities:             
Proceeds from borrowings under revolving credit facility—
 163.0
 —
 7.0
 —
 —
 170.0
Repayments of borrowings under revolving credit facility—
 (163.0) —
 (7.0) —
 —
 (170.0)
Repayments of long-term debt—
 (3.7) —
 —
 —
 —
 (3.7)
Net change in accounts payable-inventory financing—
 (0.9) 1.0
 24.8
 —
 —
 24.9
Repurchases of common stock(109.2) —
 —
 —
 —
 —
 (109.2)
Payment of incentive compensation plan withholding taxes(8.7) —
 —
 —
 —
 —
 (8.7)
Dividend payments(32.0) —
 —
 —
 —
 —
 (32.0)
Other—
 (2.2) (0.1) (0.2) —
 —
 (2.5)
Distributions and advances from (to) affiliates149.9
 91.3
 (239.3) —
 —
 (1.9) —
Net cash (used in) provided by financing activities—
 84.5
 (238.4) 24.6
 —
 (1.9) (131.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash—
 —
 —
 1.7
 —
 —
 1.7
Net increase in cash, cash equivalents and restricted cash—
 59.6
 —
 33.5
 —
 (16.3) 76.8
Cash, cash equivalents and restricted cash—beginning of period—
 113.7
 —
 32.4
 —
 (1.9) 144.2
Cash, cash equivalents and restricted cash—end of period$—
 $173.3
 $—
 $65.9
 $—
 $(18.2) $221.0
Condensed Consolidating Statement of Comprehensive Income
Three Months Ended June 30, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Comprehensive income$146.4
 $146.5
 $207.9
 $(12.1) $—
 $(342.3) $146.4
Condensed Consolidating Statement of Comprehensive Income
Three Months Ended June 30, 2017
 (as adjusted)
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Comprehensive income$158.7
 $158.7
 $171.4
 $26.9
 $—
 $(357.0) $158.7
Condensed Consolidating Statement of Comprehensive Income
Six Months Ended June 30, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Comprehensive income$290.8
 $291.0
 $372.8
 $15.1
 $—
 $(678.9) $290.8
Condensed Consolidating Statement of Comprehensive Income
Six Months Ended June 30, 2017
 (as adjusted)
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Comprehensive income$222.9
 $222.9
 $291.4
 $42.3
 $—
 $(556.6) $222.9







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CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2018
(in millions)
Parent
Guarantor
 
Subsidiary
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 Co-Issuer 
Consolidating
Adjustments
 Consolidated
Net cash provided by (used in) operating activities$—
 $(71.8) $343.9
 $74.2
 $—
 $(14.0) $332.3
Cash flows used in investing activities:             
Capital expenditures—
 (24.2) (1.9) (7.5) —
 —
 (33.6)
Net cash used in investing activities—
 (24.2) (1.9) (7.5) —
 —
 (33.6)
Cash flows (used in) provided by financing activities:             
Proceeds from borrowings under revolving credit facilities—
 467.5
 —
 20.6
 —
 —
 488.1
Repayments of borrowings under revolving credit facilities—
 (467.5) —
 (6.9) —
 —
 (474.4)
Repayments of long-term debt—
 (7.5) —
 —
 —
 —
 (7.5)
Payments of debt financing costs—
 (1.0) —
 —
 —
 —
 (1.0)
Net change in accounts payable-inventory financing—
 (0.9) (100.8) (8.7) —
 —
 (110.4)
Premium payments on interest rate cap agreements—
 (12.6) —
 —
 —
 —
 (12.6)
Proceeds from stock option exercises—
 19.9
 —
 —
 —
 —
 19.9
Proceeds from Coworker Stock Purchase Plan—
 5.4
 —
 —
 —
 —
 5.4
Repurchases of common stock(176.4) —
 —
 —
 —
 —
 (176.4)
Payment of incentive compensation plan withholding taxes(8.7) —
 —
 —
 —
 —
 (8.7)
Dividends(63.8) —
 —
 —
 —
 —
 (63.8)
Repayment of intercompany loan—
 —
 47.5
 (47.5) —
 —
 —
Other—
 3.6
 (0.2) (0.2) —
 —
 3.2
Distributions and advances from (to) affiliates248.9
 46.3
 (288.5) —
 —
 (6.7) —
Net cash (used in) provided by financing activities—
 53.2
 (342.0) (42.7) —
 (6.7) (338.2)
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (4.0) —
 —
 (4.0)
Net (decrease) increase in cash and cash equivalents—
 (42.8) —
 20.0
 —
 (20.7) (43.5)
Cash and cash equivalents—beginning of period—
 113.7
 —
 32.4
 —
 (1.9) 144.2
Cash and cash equivalents—end of period$—
 $70.9
 $—
 $52.4
 $—
 $(22.6) $100.7

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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
(as adjusted)
(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) $376.2
Cash flows used in investing activities:             
Capital expenditures—
 (26.6) (4.3) (5.9) —
 —
 (36.8)
Net cash used in investing activities—
 (26.6) (4.3) (5.9) —
 —
 (36.8)
Cash flows (used in) provided by financing activities:             
Proceeds from borrowings under revolving credit facilities—
 54.0
 —
 13.7
 —
 —
 67.7
Repayments of borrowings under revolving credit facilities—
 —
 —
 (13.7) —
 —
 (13.7)
Repayments of long-term debt—
 (7.5) —
 —
 —
 —
 (7.5)
Proceeds from issuance of long-term debt—
 2,083.0
 —
 —
 —
 —
 2,083.0
Payments to extinguish long-term debt—
 (2,121.3) —
 —
 —
 —
 (2,121.3)
Payment of debt financing costs—
 (9.6) —
 —
 —
 —
 (9.6)
Net change in accounts payable-inventory financing—
 (1.2) (83.9) —
 —
 —
 (85.1)
Proceeds from stock option exercises—
 7.4
 —
 —
 —
 —
 7.4
Proceeds from Coworker Stock Purchase Plan—
 4.7
 —
 —
 —
 —
 4.7
Repurchases of common stock(359.4) —
 —
 —
 —
 —
 (359.4)
Payment of incentive compensation plan withholding taxes—
 (16.0) (24.0) (2.0) —
 —
 (42.0)
Dividends(50.3) —
 —
 —
 —
 —
 (50.3)
Repayment of intercompany loan—
 —
 34.3
 (34.3) —
 —
 —
Other—
 —
 (0.1) (0.5) —
 —
 (0.6)
Distributions and advances from (to) affiliates409.7
 (100.5) (316.6) —
 —
 7.4
 —
Net cash used in financing activities—
 (107.0) (390.3) (36.8) —
 7.4
 (526.7)
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 2.6
 —
 —
 2.6
Net (decrease) increase in cash and cash equivalents—
 (155.7) (3.1) 0.6
 —
 (26.5) (184.7)
Cash and cash equivalents—beginning of period—
 222.7
 3.1
 37.9
 —
 —
 263.7
Cash and cash equivalents—end of period$—
 $67.0
 $—
 $38.5
 $—
 $(26.5) $79.0

 


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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 and the related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.2018. 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 and a leading provider of integrated information technology ("IT") solutions to small, medium and large business, and government, education and healthcare customers in the United States ("US"),US, the United Kingdom ("UK")UK and Canada. Our broad array of offerings ranges 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 broad portfolio including more than 100,000 products and services from more than 1,000 leading and emerging brands. Our solutions are delivered in physical, virtual and cloud-based environments through over 6,000 customer-facing coworkers, including sellers, highly-skilled technology specialists and advanced service delivery engineers. We are a leading sales channel partner for many original equipment manufacturers ("OEMs"), software publishers and cloud providers (collectively, our "vendor partners"), whose products we sell or include in the solutions we offer. We provide our vendor 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.
We have three reportable segments, Corporate, Small Business and Public. Our Corporate segment primarily serves US private sector business customers with more than 250 employees. Our Small Business segment primarily serves US private sector business customers with up to 250 employees. Our Public segment is comprised of government agencies and education and healthcare institutions in the US. We also have two other operating segments: CDW UK and CDW Canada, each of which do not meet the reportable segment quantitative thresholds and, accordingly, are included in an all other category ("Other").
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 are 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.
Effective January 1, 2018, we adopted the requirements of ASU 2014-09, Revenue from Contracts with Customers, as amended ("Topic 606"), utilizing the full retrospective method as discussed in Note 2 (Recent Accounting Pronouncements) to the accompanying Consolidated
Trends and Key Factors Affecting our Financial Statements. Prior period amounts have been adjusted accordingly.
Key factors affecting our financial performancePerformance
We believe the following key factors may have a meaningful impact on our business performance, influencing our ability to generate sales and achieve our targeted financial and operating results:
General economic conditions are a key factor affecting our results as they impact our customers’customers' willingness to spend on information technology. This is particularly the case for businessour Corporate and Small Business customers, as their purchases tend to reflect confidence in their business prospects, which are driven by their discrete perceptions of business conditions. Purchasing behavior may be different between our Corporate customers and Small Business customers due to their perception of businessgeneral economic conditions. Additionally, changes in trade policy and product constraints from suppliers could have an adverse impact on our business. There continues to be substantial uncertainty regarding the impact of the UK's planned withdrawal from the European Union ("EU") (referred to as "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 the timing and terms of Brexit. We have established a presence on the continent to support CDW UK's broader growth opportunities in the EU. This also serves as a contingency plan to address future developments as needed around Brexit.

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Changes in spending policies, budget priorities and funding levels are a key factor influencing the purchasing levels of government, healthcare and education customers.

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Table of Contents


Technology trends drive customer purchasing behaviors in the market. Current technology trends are focused on delivering greater flexibility and efficiency, as well as designing IT securely. These trends are driving customer adoption of solutions such as those delivered via cloud, software defined architectures and hybrid on-premise and off-premise combinations.combinations, as well as the evolution of the IT consumption model to more "as-a-service" offerings, including Device-as-a-Service ("DaaS") and managed services.
Key business metricsBusiness Metrics
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. Effective January 1, 2019, we made a change to the Non-GAAP financial measures that we use to provide meaningful methods of evaluating our financial performance and have replaced EBITDA, Adjusted EBITDA and Adjusted EBITDA margin with Non-GAAP operating income and Non-GAAP operating income margin. We made this change due to the continuing evolution of the IT consumption model. We believe Non-GAAP operating income will be more reflective of the costs of providing services to our customers and our own costs as the consumption model continues to evolve. Non-GAAP operating income is also being used for the first time in 2019 as a key business metric for our annual incentive compensation programs.
In addition to Non-GAAP operating income and Non-GAAP operating income margin, we believe that the most important of thesefinancial and non-financial measures and ratios include average daily sales, gross margin, operating margin, Net income, Non-GAAP income before income taxes, Non-GAAP net income, Net income per common share, Non-GAAP net income per diluted share, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, return on working capital, Cash and cash equivalents, net working capital, cash conversion cycle (defined to be 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), 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 operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes and Non-GAAP net income, Non-GAAP net income per diluted share, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial 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"), which is 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 6 (Long-Term Debt) to the accompanying Consolidated Financial Statements. For the definitions of Non-GAAP operating income, Non-GAAP income before income taxes and Non-GAAP net income and Adjusted EBITDA and reconciliations to Net income,the most directly comparable GAAP measure, see "Results of Operations.Operations - Non-GAAP Financial Measure Reconciliations."


The results of certain business metrics are as follows:
 Three Months Ended March 31,
(dollars in millions)2019 2018
Net sales$3,957.9
 $3,606.4
Gross profit672.1
 603.9
Operating income228.9
 204.1
Net income152.9
 127.0
Non-GAAP operating income287.3
 259.4
Non-GAAP net income185.4
 162.8
Average daily sales(1)
62.8
 56.4
Net debt(2)
2,998.4
 3,014.5
Cash conversion cycle (in days)(3)
17
 17
 Three Months Ended June 30,
(dollars in millions)2018 
2017(1)
Net sales$4,186.1
 $3,891.7
Gross profit695.6
 640.8
Income from operations265.5
 230.8
Net income173.0
 140.9
Non-GAAP net income213.2
 163.0
Adjusted EBITDA344.7
 314.5
Average daily sales(2)
65.4
 60.8
Net debt(3)
3,139.6
 3,217.3
Cash conversion cycle (in days)(4)
17
 16
(1)AmountsThere were 63 and 64 selling days for 2017 have been adjusted to reflect the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).three months ended March 31, 2019 and 2018, respectively.
(2)There were 64 selling days for both the three months ended June 30, 2018 and 2017.
(3)Defined as Total debt minus Cash and cash equivalents.

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(4)(3)Cash conversion cycle is defined as days of sales outstanding in Accounts receivable and certain receivables due from vendors plus days of supply in Merchandise 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
Three Months Ended June 30, 2018March 31, 2019 Compared to Three Months Ended June 30, 2017March 31, 2018
Results of operations, in dollars and as a percentage of Net sales are as follows:
 Three Months Ended June 30, Three Months Ended March 31,
 2018 
2017(1)
 2019 2018
 
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 $4,186.1
 100.0 % $3,891.7
 100.0 % $3,957.9
 100.0 % $3,606.4
 100.0 %
Cost of sales 3,490.5
 83.4
 3,250.9
 83.5
 3,285.8
 83.0
 3,002.5
 83.3
Gross profit 695.6
 16.6
 640.8
 16.5
 672.1
 17.0
 603.9
 16.7
Selling and administrative expenses 381.4
 9.1
 363.5
 9.3
 404.0
 10.2
 362.7
 10.1
Advertising expense 48.7
 1.2
 46.5
 1.2
 39.2
 1.0
 37.1
 1.0
Income from operations 265.5
 6.3
 230.8
 5.9
Operating income 228.9
 5.8
 204.1
 5.7
Interest expense, net (37.2) (0.9) (35.9) (0.9) (38.3) (1.0) (37.7) (1.0)
Other income, net 1.5
 —
 0.4
 —
Other income (expense), net 1.0
 —
 (0.7) —
Income before income taxes 229.8
 5.5
 195.3
 5.0
 191.6
 4.8
 165.7
 4.6
Income tax expense (56.8) (1.4) (54.4) (1.4) (38.7) (1.0) (38.7) (1.1)
Net income $173.0
 4.1 % $140.9
 3.6 % $152.9
 3.9 % $127.0
 3.5 %
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.


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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 are as follows:
 Three Months Ended June 30,     Three Months Ended March 31,      
 2018 
2017(1)
     2019 2018      
(dollars in millions) Net Sales 
Percentage
of Total Net Sales
 Net Sales 
Percentage
of Total Net Sales
 
Dollar
Change
 
Percent
Change(2)
 Net Sales 
Percentage
of Total Net Sales
 Net Sales 
Percentage
of Total Net Sales
 
Dollar
Change
 
Percent
Change
 
Average Daily Sales Percent Change(1)
Corporate $1,733.8
 41.4% $1,580.1
 40.6% $153.7
 9.7 % $1,736.2
 43.9% $1,565.8
 43.4% $170.4
 10.9% 12.6%
                          
Small Business 329.5
 7.9
 315.0
 8.1
 14.5
 4.6
 355.6
 9.0
 327.6
 9.1
 28.0
 8.5
 10.3
                          
Public:                          
Government 493.5
 11.8
 523.4
 13.5
 (29.9) (5.7) 488.4
 12.3
 418.5
 11.6
 69.9
 16.7
 18.6
Education 712.1
 17.0
 704.9
 18.1
 7.2
 1.0
 400.4
 10.1
 397.2
 11.0
 3.2
 0.8
 2.4
Healthcare 429.8
 10.3
 404.5
 10.4
 25.3
 6.3
 441.9
 11.2
 414.3
 11.5
 27.6
 6.7
 8.4
Total Public 1,635.4
 39.1
 1,632.8
 42.0
 2.6
 0.2
 1,330.7
 33.6
 1,230.0
 34.1
 100.7
 8.2
 9.9
                          
Other 487.4
 11.6
 363.8
 9.3
 123.6
 34.0
 535.4
 13.5
 483.0
 13.4
 52.4
 10.9
 12.6
                          
Total net sales $4,186.1
 100.0% $3,891.7
 100.0% $294.4
 7.6 %
Total Net sales $3,957.9
 100.0% $3,606.4
 100.0% $351.5
 9.7% 11.5%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)
There were 63 and 64 selling days for both the three months ended June 30,March 31, 2019 and 2018, and 2017.
respectively.
Total Net sales for the three months ended June 30, 2018March 31, 2019 increased $294$352 million, or 7.6%9.7%, to $4,186$3,958 million, compared to $3,892$3,606 million for the three months ended June 30, 2017.March 31, 2018. Excluding the impact of foreign currency fluctuations, constant currency Net sales growth was 7.0%10.6%. There was one fewer selling day in the three months ended March 31, 2019 compared to the same period of 2018, and Net sales on an average daily sales basis increased 11.5%. See "Non-GAAP Financial Measure Reconciliations" below for additional informationdetail regarding constant currency Net sales growth.
For the three months ended June 30, 2018, ongoing focus onMarch 31, 2019, Net sales growth reflected growth across most major product categories, particularly client device refresh across all customer-end markets, except Federal, coupled withdevices, software, servers and enterprise storage. Additionally, strong results from our international operations, droveincluding two months of Net sales from Scalar Decisions Inc. ("Scalar"), which was acquired on February 1, 2019, contributed to our Net sales growth.
Corporate segment Net sales for the three months ended June 30, 2018March 31, 2019 increased $154$170 million, or 9.7%10.9%, compared to the three months ended June 30, 2017.March 31, 2018. On an average daily sales basis, Corporate segment Net sales increased 12.6%. Growth was primarily driven by client device refresh, as well as ongoing success helping customers with solutions, including data centerdevices, software, networking and software.servers.
Small Business segment Net sales for the three months ended June 30, 2018March 31, 2019 increased by $15$28 million, or 4.6%8.5%, between periods. Sales growthcompared to the three months ended March 31, 2018. On an average daily sales basis, Small Business segment Net sales increased 10.3%. Growth was primarily driven by client device refresh.devices.
Public segment Net sales for the three months ended June 30, 2018March 31, 2019 increased $3$101 million, or 0.2%8.2%, compared to the three months ended June 30, 2017.March 31, 2018. On an average daily sales basis, Public segment Net sales increased 9.9%. The growthincrease was primarily driven by Healthcare, which offset declinesgrowth in Government and Healthcare. On an average daily sales basis, Net sales to Government customers.and Healthcare customers increased 18.6% and 8.4%, respectively, both primarily driven by customers modernizing their infrastructure, including servers and enterprise storage. Net sales in HealthcareEducation increased 6.3%, primarily driven by performance in desktops and video products as customers move forward2.4% on refresh projects. The decline inan average daily sales to Federal government customers primarily reflected lower client device sales. This was partially offset by sales to State & Local government customers, which werebasis, primarily driven by client device refresh. Education Net sales increased 1.0%.growth.
Net sales in Other, which is comprised of results from our UK and Canadian operations, for the three months ended June 30, 2018March 31, 2019 increased $124$52 million, or 34.0%10.9%, compared to the three months ended June 30, 2017.March 31, 2018. On an average daily sales basis, Net sales in Other increased 12.6%. Both operations had strong growthgrew in local currency as we continued to take share inand Canada growth included the local markets.incremental Net sales from Scalar. In addition, UK growth was driven in part by increased sales from referralsreferral business for US-based customers. The impact of foreign currency exchange increaseddecreased Other sales growth by approximately 700670 basis points, due to the favorableunfavorable impact resulting from the British pound and Canadian dollar to US dollar translations.


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Gross profit
Gross profit increased $55$68 million, or 8.6%11.3%, to $696$672 million for the three months ended June 30, 2018,March 31, 2019, compared to $641$604 million for the three months ended June 30, 2017.March 31, 2018. As a percentage of Net sales, Gross profit margin increased 1030 basis points to 16.6%17.0% for the three months ended June 30, 2018.March 31, 2019. Gross profit margin improvement primarily reflected the positive impact onwas positively impacted by product margin due to customer mix.improvement.
Selling and administrative expenses
Selling and administrative expenses increased $17$41 million, or 4.9%11.4%, to $381$404 million for the three months ended June 30, 2018,March 31, 2019, compared to $364$363 million for the three months ended June 30, 2017. ThisMarch 31, 2018. The increase was driven by higher payroll expenses due to increased coworkers and higher sales payroll costs,expenses, including sales commissions, which are primarily due todriven by higher Grossgross profit, dollars, partially offset by lower equity-basedtwo months of Scalar expenses and increased stock compensation expense and the associated payroll taxes due to the vesting in the prior year of an equity grant made at the time of our initial public offering.expense. Total coworker count was 8,917,9,434, including an incremental 342 coworkers from Scalar, up 130684 from 8,7878,750 at June 30, 2017.March 31, 2018. Total coworker count was 8,7269,019 at December 31, 2017.2018.
As a percentage of total Net sales, Selling and administrative expenses decreased 20increased 10 basis points to 9.1% during10.2% for the three months ended June 30, 2018, down from 9.3% in the three months ended June 30, 2017.March 31, 2019.
IncomeOperating income

During the first quarter of 2019, we evaluated our methodology for allocating certain depreciation and amortization expenses to each of our segments. The evaluation resulted in a revision to the allocation of depreciation and amortization expenses from operationsHeadquarters to our reportable segments, effective January 1, 2019. The prior period results have been recast to reflect these changes and present comparable information.
Income from operationsOperating income by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change are as follows:
 Three Months Ended June 30,   Three Months Ended March 31,  
 2018 
2017(1)
   2019 2018  
 
Dollars in
Millions
 
Operating
Margin
Percentage
 
Dollars in
Millions
 
Operating
Margin
Percentage
 
Percent Change
in Income
from Operations
 
Dollars in
Millions
 
Operating
Margin
 
Dollars in
Millions
 
Operating
Margin
 
Percent Change
in Operating Income
Segments:(2)(1)
                    
Corporate $141.3
 8.1% $126.9
 8.0% 11.4% $134.7
 7.8% $123.0
 7.9% 9.5 %
Small Business 24.6
 7.5
 19.4
 6.2
 26.8
 24.4
 6.9
 21.9
 6.7
 11.2
Public 113.0
 6.9
 104.6
 6.4
 8.0
 76.1
 5.7
 70.2
 5.7
 8.3
Other(3)(2)
 21.7
 4.5
 12.5
 3.4
 73.7
 25.6
 4.8
 19.8
 4.1
 29.6
Headquarters(4)(3)
 (35.1) nm*
 (32.6) nm*
 7.7
 (31.9) nm*
 (30.8) nm*
 (3.4)
Total income from operations $265.5
 6.3% $230.8
 5.9% 15.1%
Total Operating income $228.9
 5.8% $204.1
 5.7% 12.2 %
* Not meaningful
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Segment operating income from operations includes the segment’ssegment's direct operating income, allocations for Headquarters’Headquarters' costs, allocations for income and expenses from logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.
(3)(2)Includes the financial results for our other operating segments, CDW UK and CDW Canada, which do not meet the reportable segment quantitative thresholds.
(4)(3)Includes certain Headquarters' function costs that are not allocated to the segments.
Income from operationsOperating income was $266$229 million for the three months ended June 30, 2018,March 31, 2019, an increase of $35$25 million, or 15.1%12.2%, compared to $231$204 million for the three months ended June 30, 2017. IncomeMarch 31, 2018. Operating income increased primarily due to higher gross profit dollars, partially offset by higher payroll expenses and higher stock compensation expense. Total operating margin percentage increased 10 basis points to 5.8% for the three months ended March 31, 2019, from operations5.7% for the three months ended March 31, 2018.
Corporate segment Operating income was $135 million for the three months ended March 31, 2019, an increase of $12 million, or 9.5%, compared to $123 million for the three months ended March 31, 2018. Corporate segment Operating income increased primarily due to higher gross profit dollars, partially offset by higher payroll expenses and higher stock compensation expense.

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Corporate segment operating margin percentage decreased 10 basis points to 7.8% for the three months ended March 31, 2019, from 7.9% for the three months ended March 31, 2018.
Small Business segment Operating income was $24 million for the three months ended March 31, 2019, an increase of $2 million, or 11.2%, compared to $22 million for the three months ended March 31, 2018. Small Business segment Operating income increased primarily due to higher gross profit dollars partially offset by higher payroll expenses. Small Business segment operating margin percentage increased 20 basis points to 6.9% for the three months ended March 31, 2019, from 6.7% for the three months ended March 31, 2018. This increase in operating margin percentage was primarily driven by higher product margin.
Public segment Operating income was $76 million for the three months ended March 31, 2019, an increase of $6 million, or 8.3%, compared to $70 million for the three months ended March 31, 2018. Public segment Operating income increased primarily due to higher gross profit dollars, partially offset by higher sales payroll expenses. TotalPublic segment operating margin percentage increased 40 basis points to 6.3%remained flat at 5.7% for the three months ended June 30, 2018, from 5.9% for the three months ended June 30, 2017.March 31, 2019 and 2018.
Other Operating marginincome was positively impacted by the increase in Gross profit margin, driven by improved product margin. Also contributing to the increased operating margin percentage were lower equity-based compensation expenses and the associated payroll taxes, the non-recurrence of integration expenses in the current year and intangible asset amortization expenses as a percentage of Net sales, which do not trend in line with sales movement.
Corporate segment income from operations was $141$26 million for the three months ended June 30, 2018,March 31, 2019, an increase of $14$6 million, or 11.4%29.6%, compared to $127$20 million for the three months ended June 30, 2017. Corporate segmentMarch 31, 2018. Other Operating income from operations increased primarily due to higher gross profit dollars, drivenpartially offset by higher sales. Corporate segmentpayroll expenses. Other operating margin

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percentage increased 1070 basis points to 8.1%4.8% for the three months ended June 30, 2018,March 31, 2019, from 8.0%4.1% for the three months ended June 30, 2017.March 31, 2018. This increase in operating margin percentage was primarily driven by the benefit of lower Selling and administrative expenses as a percentage of Net sales. This was partially offset by product margin compression due to increased hardware sales.
Small Business segment income from operations was $25 million for the three months ended June 30, 2018, an increase of $6 million, or 26.8%, compared to $19 million for the three months ended June 30, 2017. Small business segment income from operations increased primarily due to higher gross profit dollars driven by higher sales and product margin. Small Business segment operating margin percentage increased 130 basis points to 7.5% for the three months ended June 30, 2018, from 6.2% for the three months ended June 30, 2017. This increase in operating margin percentage was primarily driven by higher product margin and the benefit of lower sales payroll expenses as a percentage of Net sales.
Public segment income from operations was $113 million for the three months ended June 30, 2018, an increase of $8 million, or 8.0%, compared to $105 million for the three months ended June 30, 2017. Public segment income from operations increased primarily due to higher Gross profit dollars driven by improved product margin. Public segment operating margin percentage increased 50 basis points to 6.9% for the three months ended June 30, 2018, from 6.4% for the three months ended June 30, 2017. This increase in operating margin percentage was primarily driven by higher product margin and the benefit of lower sales payroll expenses as a percentage of Net sales.
Other income from operations was $22 million for the three months ended June 30, 2018, an increase of $9 million, or 73.7%, compared to $13 million for the three months ended June 30, 2017. Other income from operations increased primarily due to higher sales volumes and Gross profit as we continue to take share in the local markets, and favorable foreign exchange. Other operating margin percentage increased 110 basis points to 4.5% for the three months ended June 30, 2018, from 3.4% for the three months ended June 30, 2017. This increase was primarily due to lower sales payroll expenses and intangible asset amortization as a percentage of Net sales. Also contributing to thesales partially offset by higher payroll expenses consistent with increased operating margin percentage is the non-recurrence of integration expenses in the current year.coworker count.
Income tax expense
Income tax expense was $57$39 million for the three months ended June 30, 2018, compared to $54 million for the same period of the prior year.March 31, 2019 and 2018. The effective income tax rate, expressed by calculating the income tax expense as a percentage of Income before income taxes, was 24.7%20.2% for the three months ended June 30, 2018March 31, 2019 and differed from the US federal statutory rate of 21.0% primarily due to excess tax benefits on equity-based compensation and a discrete tax benefit of $3 million related to CDW Canada's acquisition of Scalar, which was partially offset by state and local income taxes. The effective tax rate for the same period of the prior year was 23.4% and differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the same period of the prior year was 27.9% and differed from the US federal statutory rate of 35.0% primarily due to excess tax benefits on equity-based compensation.


The lower effective tax rate for the three months ended June 30, 2018March 31, 2019 as compared to the same period of the prior year was primarily attributable to the reduction in the US federal statutory rate, partially offset by lowerhigher excess tax benefits on equity-based compensation and a higher effective net state incomediscrete tax rate primarily duebenefit of $3 million related to the reduced US federal benefit.CDW Canada's acquisition of Scalar.
Non-GAAP Financial Measure Reconciliations
We have included reconciliations of Non-GAAP operating income, Non-GAAP income before income taxes, Non-GAAP net income EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and consolidated Net sales growth on a constant currency basis for the three months ended June 30,March 31, 2019 and 2018 and 2017 below.
Non-GAAP operating income excludes, among other things, charges related to the amortization of acquisition-related intangible assets, equity-based compensation and the associated payroll taxes, and acquisition and integration expenses. Non-GAAP operating income margin is defined as Non-GAAP operating income as a percentage of Net sales. Non-GAAP income before income taxes, and Non-GAAP net income exclude, among other things, charges related to the amortization of acquisition-related intangible assets,asset amortization, equity-based compensation, and associated taxes, gains and losses from the extinguishment of debtacquisition and integration expenses. EBITDA is defined as consolidated net income before interest expense, net, incomeexpenses, and the associated 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. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentageeffects of Net sales. Consolidatedeach. Net sales growth on a constant currency basis is defined as consolidated Net sales growth excluding the impact of foreign currency translation on net sales compared to the prior period.
Non-GAAP operating income, Non-GAAP operating income margin, Non-GAAP income before income taxes, Non-GAAP net income EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and consolidated 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.

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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 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 6 (Long-Term Debt) to the accompanying Consolidated Financial Statements.    

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Non-GAAP netoperating income
Non-GAAP netoperating income was $213$287 million for the three months ended June 30, 2018,March 31, 2019, an increase of $50$28 million, or 30.8%10.7%, compared to $163$259 million for the three months ended June 30, 2017.March 31, 2018. As a percentage of Net sales, Non-GAAP operating income was 7.3% for the three months ended March 31, 2019 and 7.2% for the three months ended March 31, 2018.
  Three Months Ended June 30,
  2018 
2017(1)
(dollars in millions) Income before income taxes 
Income tax expense(2)
 Net income Income before income taxes 
Income tax expense(2)
 Net income
GAAP (as reported) $229.8
 $(56.8) $173.0
 $195.3
 $(54.4) $140.9
Amortization of intangibles(3)
 46.6
 (11.7) 34.9
 46.3
 (16.7) 29.6
Equity-based compensation 11.0
 (6.3) 4.7
 11.5
 (22.6) (11.1)
Integration expenses(4)
 —
 —
 —
 2.0
 (0.7) 1.3
Other adjustments(5)
 0.7
 (0.1) 0.6
 3.7
 (1.4) 2.3
Non-GAAP $288.1
 $(74.9) $213.2
 $258.8
 $(95.8) $163.0
  Three Months Ended March 31,
(dollars in millions) 2019 2018
Operating income $228.9
 $204.1
Amortization of intangibles(1)
 44.4
 46.7
Equity-based compensation 12.7
 8.1
Scalar acquisition and integration expenses 0.4
 —
Other adjustments(2)
 0.9
 0.5
Non-GAAP operating income $287.3
 $259.4
Non-GAAP operating income margin 7.3% 7.2%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Income tax on non-GAAP adjustments includes excess tax benefits associated with equity compensation. Additionally, 2018 includes the impact of global intangible low tax income ("GILTI") on equity-based compensation and amortization of intangibles.
(3)Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.
(4)Comprised of expenses related to CDW UK.
(5)(2)Includes other expenses such as payroll taxes on equity-based compensation during the three months ended June 30, 2018March 31, 2019 and 2017.2018.

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Adjusted EBITDA
Adjusted EBITDA was $345 million for the three months ended June 30, 2018, an increase of $31 million, or 9.6%, compared to $314 million for the three months ended June 30, 2017. As a percentage of Net sales, Adjusted EBITDA was 8.2% for the three months ended June 30, 2018 and 8.1% for the three months ended June 30, 2017.
  Three Months Ended June 30,
(in millions) 2018 Percentage of Net Sales 
2017(1)
 Percentage of Net Sales
Net income $173.0
   $140.9
  
Depreciation and amortization 66.3
   65.4
  
Income tax expense 56.8
   54.4
  
Interest expense, net 37.2
   35.9
  
EBITDA 333.3
 8.0% 296.6
 7.6%
         
Adjustments:        
Equity-based compensation 11.0
   11.5
  
Integration expenses(2)
 —
   2.0
  
Other adjustments(3)
 0.4
   4.4
  
Total adjustments 11.4
   17.9
  
Adjusted EBITDA $344.7
 8.2% $314.5
 8.1%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Comprised of expenses related to CDW UK.
(3)Includes other expenses such as payroll taxes on equity-based compensation and our share of net income from our equity investment during the three months ended June 30, 2018 and 2017. Also includes historical retention costs during the three months ended June 30, 2017.
Consolidated net sales growth on constant currency basis
Consolidated Net sales increased $294 million, or 7.6%, to $4,186 million for the three months ended June 30, 2018, compared to $3,892 million for the three months ended June 30, 2017. Consolidated Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased $275 million, or 7.0%.
  Three Months Ended June 30,
(in millions) 2018 
2017(1)
 % Change 
Average Daily % Change(2)
Consolidated Net sales, as reported $4,186.1
 $3,891.7
 7.6% 7.6%
Foreign currency translation(3)
 —
 19.5
    
Consolidated Net sales, on a constant currency basis $4,186.1
 $3,911.2
 7.0% 7.0%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)There were 64 selling days for both the three months ended June 30, 2018 and 2017.
(3)Represents the effect of translating the prior year results of CDW UK and CDW Canada at the average exchange rates applicable in the current year.

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Six Months Overview

The results of certain business metrics are as follows:
 Six Months Ended June 30,
(dollars in millions)2018 
2017(1)
Net sales$7,792.5
 $7,147.6
Gross profit1,299.5
 1,194.3
Income from operations469.6
 401.5
Net income300.0
 199.0
Non-GAAP net income376.0
 284.9
Adjusted EBITDA624.5
 564.5
Average daily sales(2)
60.9
 55.8
Net debt(3)
3,139.6
 3,217.3
Cash conversion cycle (in days)(4)
17
 16
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)There were 128 selling days for both the six months ended June 30, 2018 and 2017.
(3)Defined as Total debt minus Cash and cash equivalents.
(4)Cash conversion cycle is defined as days of sales outstanding in Accounts receivable and certain receivables due from vendors plus days of supply in Merchandise inventory minus days of purchases outstanding in Accounts payable and Accounts payable-inventory financing, based on a rolling three-month average.

Results of Operations
Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017
Results of operations, in dollars and as a percentage of Net sales are as follows:
  Six Months Ended June 30,
  2018 
2017(1)
  
Dollars in
Millions
 
Percentage of
Net Sales
 
Dollars in
Millions
 
Percentage of
Net Sales
Net sales $7,792.5
 100.0 % $7,147.6
 100.0 %
Cost of sales 6,493.0
 83.3
 5,953.3
 83.3
Gross profit 1,299.5
 16.7
 1,194.3
 16.7
Selling and administrative expenses 744.1
 9.5
 710.9
 9.9
Advertising expense 85.8
 1.1
 81.9
 1.1
Income from operations 469.6
 6.0
 401.5
 5.6
Interest expense, net (74.9) (1.0) (75.6) (1.1)
Net loss on extinguishments of long-term debt —
 —
 (57.4) (0.8)
Other income, net 0.8
 —
 1.3
 —
Income before income taxes 395.5
 5.1
 269.8
 3.8
Income tax expense (95.5) (1.2) (70.8) (1.0)
Net income $300.0
 3.8 % $199.0
 2.8 %
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.

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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 are as follows:
  Six Months Ended June 30,    
  2018 
2017(1)
    
(dollars in millions) Net Sales 
Percentage
of Total Net Sales
 Net Sales 
Percentage
of Total Net Sales
 
Dollar
Change
 
Percent
Change(2)
Corporate $3,299.6
 42.3% $3,020.7
 42.2% $278.9
 9.2%
             
Small Business 657.1
 8.4
 607.0
 8.5
 50.1
 8.3
             
Public:            
Government 912.0
 11.7
 898.1
 12.6
 13.9
 1.5
Education 1,109.3
 14.2
 1,098.1
 15.4
 11.2
 1.0
Healthcare 844.1
 10.8
 790.3
 11.0
 53.7
 6.8
Total Public 2,865.4
 36.8
 2,786.5
 39.0
 78.8
 2.8
             
Other 970.4
 12.5
 733.4
 10.3
 237.0
 32.3
             
Total net sales $7,792.5
 100.0% $7,147.6
 100.0% $644.8
 9.0%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)
There were 128 selling days for both the six months ended June 30, 2018 and 2017.
Total Net sales for the six months ended June 30, 2018 increased $645 million, or 9.0%, to $7,793 million, compared to $7,148 million for the six months ended June 30, 2017. Excluding the impact of foreign currency fluctuations, constant currency Net sales growth was 8.2%. See "Non-GAAP Financial Measure Reconciliations" below for additional information regarding constant currency Net sales growth.
For the six months ended June 30, 2018, growth was driven by ongoing focus on client device refresh within hardware and strong growth from our international operations. In addition, increased sales of solutions-based hardware reflected both underlying demand as well as the impact of the reversal associated with supply chain issues experienced at the end of 2017.
Corporate segment Net sales for the six months ended June 30, 2018 increased $279 million, or 9.2% compared to the six months ended June 30, 2017. Growth was primarily driven by client device refresh, as well as ongoing success helping customers with solutions, including data center and software.
Small Business segment Net sales for the six months ended June 30, 2018 increased by $50 million, or 8.3%, between periods. Sales growth was primarily driven by client device refresh.
Public segment Net sales for the six months ended June 30, 2018 increased $79 million, or 2.8%, compared to the six months ended June 30, 2017. Net sales in Healthcare increased 6.8%, primarily driven by performance in desktops and video products as customers move forward on refresh projects. Net sales to Government customers grew at 1.5% and increased $14 million. Sales to State and Local government customers were driven by the success of executing against recently added contracts. This growth was partially offset by a decline in Federal sales primarily due to lower client device and networking sales. Education Net sales increased 1.0% as ongoing success addressing networking and client device needs in Higher Education was partially offset by K-12 networking performance.
Net sales in Other, which is comprised of results from our UK and Canadian operations, for the six months ended June 30, 2018 increased $237 million, or 32.3%, compared to the six months ended June 30, 2017. Both operations had strong growth in local currency as we continued to take share in the local markets. In addition, UK growth was driven in part by increased sales from referrals for US-based customers. The impact of foreign currency exchange increased Other sales growth by approximately 900 basis points, due to the favorable impact resulting from the British pound and Canadian dollar to US dollar translations.

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Gross profit
Gross profit increased $105 million, or 8.8%, to $1,300 million for the six months ended June 30, 2018, compared to $1,194 million for the six months ended June 30, 2017. As a percentage of Net sales, Gross profit margin remained flat compared to the prior year at 16.7%. Gross profit margin was positively impacted by improved product margin due to the mix of customers. This was offset by lower partner funding margin due to year-over-year revenue growth out-pacing year-over-year increases in partner funding.
Selling and administrative expenses
Selling and administrative expenses increased $33 million, or 4.7%, to $744 million for the six months ended June 30, 2018, compared to $711 million for the six months ended June 30, 2017. This was driven by higher sales payroll costs, including sales commissions primarily due to higher Gross profit dollars. This was partially offset by lower equity-based compensation expense and the associated payroll taxes due to the vesting in the prior year of an equity grant made at the time of our initial public offering.
As a percentage of total Net sales, Selling and administrative expenses decreased 40 basis points to 9.5% during the six months ended June 30, 2018, down from 9.9% in the six months ended June 30, 2017.
Income from operations
Income from operations by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change are as follows:
  Six Months Ended June 30,  
  2018 
2017(1)
  
  
Dollars in
Millions
 
Operating
Margin
Percentage
 
Dollars in
Millions
 
Operating
Margin
Percentage
 
Percent Change
in Income
from Operations
Segments:(2)
          
Corporate $266.1
 8.1% $239.0
 7.9% 11.3%
Small Business 46.9
 7.1
 36.0
 5.9
 30.3
Public 184.7
 6.4
 165.3
 5.9
 11.7
Other(3)
 41.5
 4.3
 25.1
 3.4
 65.1
Headquarters(4)
 (69.6) nm*
 (63.9) nm*
 8.9
Total income from operations $469.6
 6.0% $401.5
 5.6% 16.9%
* Not meaningful
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)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.
(3)Includes the financial results for our other operating segments, CDW UK and CDW Canada, which do not meet the reportable segment quantitative thresholds.
(4)Includes certain Headquarters' function costs that are not allocated to the segments.
Income from operations was $470 million for the six months ended June 30, 2018, an increase of $68 million, or 16.9%, compared to $402 million for the six months ended June 30, 2017. Income from operations increased primarily due to higher gross profit dollars, partially offset by higher sales payroll expenses. Total operating margin percentage increased 40 basis points to 6.0% for the six months ended June 30, 2018, from 5.6% for the six months ended June 30, 2017. The increase was primarily due to lower equity-based compensation expense and the associated payroll taxes and intangible asset amortization as a percentage of Net sales, which do not trend in line with sales movement. Also contributing to the increased operating margin percentage were lower sales payroll expenses as a percentage of Net sales.
Corporate segment income from operations was $266 million for the six months ended June 30, 2018, an increase of $27 million, or 11.3%, compared to $239 million for the six months ended June 30, 2017. Corporate segment income from operations increased primarily due to higher gross profit dollars driven by higher sales. Corporate segment operating margin percentage

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increased 20 basis points to 8.1% for the six months ended June 30, 2018, from 7.9% for the six months ended June 30, 2017. This increase in operating margin percentage was primarily driven by the benefit of lower Selling and administrative expenses as a percentage of Net sales. This was partially offset by product margin compression due to increased hardware sales.
Small Business segment income from operations was $47 million for the six months ended June 30, 2018, an increase of $11 million, or 30.3%, compared to $36 million for the six months ended June 30, 2017. Small business segment income from operations increased primarily due to higher gross profit dollars. Small Business segment operating margin percentage increased 120 basis points to 7.1% for the six months ended June 30, 2018, from 5.9% for the six months ended June 30, 2017. This increase in operating margin percentage was primarily driven by higher product margin and the benefit of lower sales payroll expenses and intangible asset amortization expenses as a percentage of Net sales.
Public segment income from operations was $185 million for the six months ended June 30, 2018, an increase of $20 million, or 11.7%, compared to $165 million for the six months ended June 30, 2017. Public segment income from operations increased primarily due to higher Gross profit dollars driven by improved product margin. Public segment operating margin percentage increased 50 basis points to 6.4% for the six months ended June 30, 2018, from 5.9% for the six months ended June 30, 2017. This increase in operating margin percentage was primarily driven by a higher product margin and the benefit of lower sales payroll expenses as a percentage of Net sales.
Other income from operations was $42 million for the six months ended June 30, 2018, an increase of $17 million, or 65.1%, compared to $25 million for the six months ended June 30, 2017. Other income from operations increased primarily due to higher sales volumes and Gross profit as we continue to take share in the local markets, and favorable foreign exchange. Other operating margin percentage increased 90 basis points to 4.3% for the six months ended June 30, 2018, from 3.4% for the six months ended June 30, 2017. This increase was primarily due to lower sales payroll expenses and lower intangible asset amortization as a percentage of Net sales. Also contributing to the increased operating margin percentage was the non-recurrence of integration expenses in the current year.
Net loss on extinguishments of long-term debt
During the six months ended June 30, 2017, we incurred a net loss on extinguishment of long-term debt of $57 million. For information regarding our debt, see Note 6 (Long-Term Debt) to the accompanying Consolidated Financial Statements.
Net loss on extinguishments of long-term debt for the six months ended June 30, 2017 are as follows:
Month of ExtinguishmentDebt Instrument (in millions) 
 Amount Extinguished Loss Recognized 
February 2017Senior Secured Term Loan Facility $1,483.0
 $(13.7) 
March 2017Senior Notes due 2022 600.0
 (42.5)
(1) 
March 2017Senior secured asset-based revolving credit facility —
 (1.2) 
 Total Loss Recognized   $(57.4) 

(1)We repaid all of the remaining aggregate principal amount outstanding. The loss recognized represents the difference between the aggregate principal amount and the net carrying amount of the purchased debt, adjusted for the remaining unamortized deferred financing fees and premium.
Income tax expense
Income tax expense was $96 million for the six months ended June 30, 2018, compared to $71 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 24.1% for the six months ended June 30, 2018 and differed from the US federal statutory rate of 21.0% primarily due to state income taxes partially offset by excess tax benefits on equity-based compensation. The effective tax rate for the same period of the prior year was 26.2% and differed from the US federal statutory rate primarily due to excess tax benefits on equity-based compensation.

The lower effective tax rate for the six months ended June 30, 2018 as compared to the same period of the prior year was primarily attributable to the reduction in the US federal statutory rate, partially offset by lower excess tax benefits on equity-based compensation and a higher effective net state income tax rate primarily due to the reduced US federal benefit.

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Non-GAAP Financial Measure Reconciliations
We have included reconciliations of Non-GAAP income before income taxes, Non-GAAP net income, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and consolidated Net sales growth on a constant currency basis for the six months ended June 30, 2018 and 2017 below. See the "Non-GAAP Financial Measure Reconciliations" section included above for the three months ended June 30, 2018 and 2017 for all Non-GAAP measure definitions.
Non-GAAP net income
Non-GAAP net income was $376$185 million for the sixthree months ended June 30, 2018,March 31, 2019, an increase of $91$22 million, or 32.0%13.9%, compared to $285$163 million for the sixthree months ended June 30, 2017.March 31, 2018.
 Six Months Ended June 30, Three Months Ended March 31,
 2018 
2017(1)
 2019 2018
(dollars in millions) Income before income taxes 
Income tax expense(2)
 Net income Income before income taxes 
Income tax expense(2)
 Net income
(in millions) Income before income taxes 
Income tax expense(1)
 Net income Income before income taxes 
Income tax expense(1)
 Net income
GAAP (as reported) $395.5
 $(95.5) $300.0
 $269.8
 $(70.8) $199.0
 $191.6
 $(38.7) $152.9
 $165.7
 $(38.7) $127.0
Amortization of intangibles(3)(2)
 93.3
 (24.0) 69.3
 92.4
 (33.2) 59.2
 44.4
 (11.3) 33.1
 46.7
 (12.3) 34.4
Equity-based compensation 19.1
 (13.3) 5.8
 23.6
 (38.4) (14.8) 12.7
 (11.3) 1.4
 8.1
 (7.0) 1.1
Net loss on extinguishments of long-term debt —
 —
 —
 57.4
 (20.6) 36.8
Integration expenses(4)
 —
 —
 —
 2.5
 (0.9) 1.6
Other adjustments(5)
 1.2
 (0.3) 0.9
 4.9
 (1.8) 3.1
Scalar acquisition and integration expenses(3)
 0.4
 (3.1) (2.7) —
 —
 —
Other adjustments(4)
 0.9
 (0.2) 0.7
 0.5
 (0.2) 0.3
Non-GAAP $509.1
 $(133.1) $376.0
 $450.6
 $(165.7) $284.9
 $250.0
 $(64.6) $185.4
 $221.0
 $(58.2) $162.8
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Income tax on non-GAAP adjustments includes excess tax benefits associated with equity compensation. Additionally, 2018 includesequity-based compensation and the impact of GILTI onglobal intangible low tax income ("GILTI") due to equity-based compensation and amortization of intangibles.
(3)(2)Includes amortization expense for acquisition-related intangible assets, primarily customer relationships, customer contracts and trade names.
(4)(3)Comprised of expensesIncludes a discrete tax benefit related to CDW UK.Canada's acquisition of Scalar.
(5)(4)Includes other expenses such as payroll taxes on equity-based compensation during the sixthree months ended June 30, 2018March 31, 2019 and 2017.2018.


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Adjusted EBITDANet sales growth on a constant currency basis
Adjusted EBITDA was $625Net sales increased $352 million, or 9.7%, to $3,958 million for the sixthree months ended June 30, 2018, an increase of $60 million, or 10.6%,March 31, 2019, compared to $565$3,606 million for the sixthree months ended June 30, 2017. As a percentage of Net sales, Adjusted EBITDA was 8.0% for the six months ended June 30, 2018 and 7.9% for the six months ended June 30, 2017.
  Six Months Ended June 30,
(in millions) 2018 Percentage of Net Sales 
2017(1)
 Percentage of Net Sales
Net income $300.0
   $199.0
  
Depreciation and amortization 132.9
   129.5
  
Income tax expense 95.5
   70.8
  
Interest expense, net 74.9
   75.6
  
EBITDA 603.3
 7.7% 474.9
 6.6%
         
Adjustments:        
Equity-based compensation 19.1
   23.6
  
Net loss on extinguishments of long-term debt —
   57.4
  
Integration expenses(2)
 —
   2.5
  
Other adjustments(3)
 2.1
   6.1
  
Total adjustments 21.2
   89.6
  
Adjusted EBITDA $624.5
 8.0% $564.5
 7.9%
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Comprised of expenses related to CDW UK.
(3)Includes other expenses such as payroll taxes on equity-based compensation and our share of net income from our equity investment during the six months ended June 30, 2018 and 2017. Also includes historical retention costs during the six months ended June 30, 2017.
Consolidated net sales growth on constant currency basis
Consolidated Net sales increased $645 million, or 9.0%, to $7,793 million for the six months ended June 30, 2018, compared to $7,148 million for the six months ended June 30, 2017. ConsolidatedMarch 31, 2018. Net sales on a constant currency basis, which excludes the impact of foreign currency translation, increased $591$379 million, or 8.2%10.6%.
  Six Months Ended June 30,
(in millions) 2018 
2017(1)
 % Change 
Average Daily % Change(2)
Consolidated Net sales, as reported $7,792.5
 $7,147.6
 9.0% 9.0%
Foreign currency translation(3)
 —
 54.3
    
Consolidated Net sales, on a constant currency basis $7,792.5
 $7,201.9
 8.2% 8.2%
  Three Months Ended March 31,
(dollars in millions) 2019 2018 % Change 
Average Daily % Change(1)
Net sales, as reported $3,957.9
 $3,606.4
 9.7% 11.5%
Foreign currency translation(2)
 —
 (27.9)    
Net sales, on a constant currency basis $3,957.9
 $3,578.5
 10.6% 12.4%
(1)AmountsThere were 63 and 64 selling days for 2017 have been adjusted to reflect the adoption of Topic 606.three months ended March 31, 2019 and 2018, respectively.
(2)
There were 128 selling days for both the six months ended June 30, 2018 and 2017.
(3)Represents the effect of translating the prior year results of CDW UK and CDW Canada 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 US 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.

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Liquidity and Capital Resources
Overview


We finance our operations and capital expenditures with internally generated cash from operations. As of June 30, 2018,March 31, 2019, we also have $1.1 billion$938 million of availability for borrowings under our senior secured asset-based revolving credit facility and an additional £40£50 million ($5365 million at June 30, 2018)March 31, 2019) 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 for at least the next 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.

Long-Term Debt and Financing Arrangements
As of March 31, 2019, we had total indebtedness of $3.3 billion, of which $1.6 billion was secured indebtedness. At March 31, 2019, we were in compliance with the covenants under our various credit agreements and indentures. For additional details, see Note 7 (Long-Term Debt) to the accompanying Consolidated Financial Statements.
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 additional details, see Note 4 (Inventory Financing Agreements) to the accompanying Consolidated Financial Statements.

Share Repurchase Program


During the sixthree months ended June 30, 2018,March 31, 2019, we repurchased 2.41.9 million shares of our common stock for $176$177 million under the previously announced 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.



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Dividends


A summary of 20182019 dividend activity for our common stock is as follows:
Dividend Amount Declaration Date Record Date Payment Date
$0.210.295 February 7, 20182019 February 26, 201825, 2019 March 12, 2018
$0.21May 2, 2018May 25, 2018June 11, 20182019

On August 2, 2018,May 1, 2019, we announced that our Board of Directors declared a quarterly cash dividend of $0.21$0.295 per common share. The dividend will be paid on September 10, 2018June 11, 2019 to all stockholders of record as of the close of business on AugustMay 24, 2018.2019.
The payment of any future dividends will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any potential indebtedness we may incur, restrictions imposed by applicable law, tax considerations and other factors that our Board of Directors deems relevant. In addition, our ability to pay dividends on our common stock will be limited by restrictions on our ability to pay dividends or make distributions to our stockholders and on the ability of our subsidiaries to pay dividends or make distributions to us, in each case, under the terms of our current and any future agreements governing our indebtedness.
Cash Flows
Cash flows from operating, investing and financing activities wereare as follows:
Six Months Ended June 30,Three Months Ended March 31,
(in millions)2018 20172019 2018
Net cash provided by (used in):      
Operating activities$332.3
 $376.2
$252.4
 $222.2
Investing activities(33.6) (36.8)(88.1) (15.9)
Net change in accounts payable-inventory financing(110.4) (85.1)70.2
 24.9
Other financing activities(227.8) (441.6)(150.4) (156.1)
Financing activities(338.2) (526.7)(80.2) (131.2)
Effect of exchange rate changes on cash and cash equivalents(4.0) 2.6
Net decrease in cash and cash equivalents$(43.5) $(184.7)
Effect of exchange rate changes on cash, cash equivalents and restricted cash0.8
 1.7
Net increase in cash, cash equivalents and restricted cash$84.9
 $76.8

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Operating Activities
Six Months Ended June 30,Three Months Ended March 31,
(in millions)2018 
2017(1)
 Dollar Change2019 2018 Change
Net income$300.0
 $199.0
 $101.0
$152.9
 $127.0
 $25.9
Adjustments for the impact of non-cash items(2)(1)
129.0
 173.4
 (44.4)66.1
 62.4
 3.7
Net income adjusted for the impact of non-cash items(3)(2)
429.0
 372.4
 56.6
219.0
 189.4
 29.6
Changes in assets and liabilities:    
    
Accounts receivable(4)(3)
(295.2) (156.0) (139.2)11.9
 60.5
 (48.6)
Merchandise inventory(5)(4)
(167.7) (52.5) (115.2)(134.2) (72.4) (61.8)
Accounts payable-trade(6)(5)
386.8
 311.8
 75.0
116.0
 (29.8) 145.8
Other(7)(6)
(20.6) (99.5) 78.9
39.7
 74.5
 (34.8)
Net cash provided by operating activities$332.3
 $376.2
 $(43.9)$252.4
 $222.2
 $30.2


(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Includes items such as deferred income taxes, depreciation and amortization, and equity-based compensation expense and Net loss on extinguishments of long-term debt.expense.
(3)(2)The change is primarily due to stronger operating results driven by Net sales and Gross profit growth, partially offset by higher sales payroll.payroll expenses.
(4)(3)The change in Accounts receivable is primarily due to the increased sales volume during 2018the first quarter of 2019 compared to 2017, partially offset by2018 and mixing into customers with longer payment cycles.

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(4)The change in Merchandise inventory is due to higher cash collections during 2018.customer-driven and strategic stocking positions and timing of receipts and shipments.
(5)The change in Merchandise inventoryAccounts payable-trade is primarily due to higher stocking positionsincreased sales in 2019 and timingthe mix of shipments in 2018 compared to 2017 and lower inventory levels at the end of 2017.vendors with longer payment terms.
(6)The change in Accounts payable-tradeOther is primarily driven by an increase in the receivables from vendors due to the timing of inventory purchases.
(7)The changegrowth in Other is primarily due to the timing of collections of the receivables from vendors.business.
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,March 31,
(in days)2018 
2017(1)
2019 2018
Days of sales outstanding ("DSO")(2)(1)
50
 49
57
 54
Days of supply in inventory ("DIO")(3)(2)
13
 12
14
 12
Days of purchases outstanding ("DPO")(4)(3)
(46) (45)(54) (49)
Cash conversion cycle17
 16
17
 17
(1)Amounts for 2017 have been adjusted to reflect the adoption of Topic 606.
(2)Represents the rolling three-month average of the balance of Accounts receivable, net at the end of the period, divided by average daily Net sales for the same three-month period. Also incorporates components of other miscellaneous receivables.
(3)(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.
(4)(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 increased towas 17 days at June 30, 2018 compared to 16 days at June 30, 2017 asMarch 31, 2019 and 2018. DSO, DIO and DPO each increased 1 day3, 2 and 5 days, respectively, compared to June 30, 2017. The increase inMarch 31, 2018. Both DSO was primarily drivenand DPO are impacted by higher Net sales and related Accounts receivable for third-partythird party services such as software as a service and warranties. These sales have an unfavorable impact

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on DSO as the receivable is recognized on the Consolidated Balance SheetSheets on a gross basis while the corresponding sales amount in the Consolidated Statement of Operations is recorded on a net basis. This also results in a favorable impact on DPO as the payable is recognized on the Consolidated Balance SheetSheets 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 to the impact of these services on DPO, DPO also increased due to the mix of payables with certain vendors that have longer payment terms. Additionally, as described above, average inventory balances increased duecompared to stocking positions and the timing of shipments to customers in 2018, which led to an unfavorable impact on DIO.
Investing Activities
Net cash used in investing activities decreasedincreased by $3$72 million in the sixthree months ended June 30, 2018March 31, 2019 compared to the same period of the prior year. The increase was primarily due to the completion of our acquisition of Scalar on February 1, 2019. Additionally, Capital expenditures were $34$19 million and $37$16 million for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively. The decreaseincrease in capital expenditures is primarily due to the timing of investments for improvements to our information technology systems.
Financing Activities
Net cash used in financing activities decreased by $189$51 million in the sixthree months ended June 30, 2018March 31, 2019 compared to the same period of the prior year. The decrease was primarily driven by fewerborrowings under our revolving credit facilities and further leveraging our inventory financing arrangements, which were partially offset by our share repurchases during the sixthree months ended June 30, 2018, which resulted in a $183 million decrease in cash used in financing activities. For more information on our share repurchase program, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds.
Long-Term Debt and Financing Arrangements
As of June 30, 2018, we had total indebtedness of $3.2 billion, of which $1.5 billion was secured indebtedness. At June 30, 2018, 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 $1.3 billion at June 30, 2018. The amount of restricted payment capacity for the CDW UK Term Loan was $133 million at June 30, 2018.
March 31, 2019. For additional details regarding our debt and refinancing activities, refer tosee Note 67 (Long-Term Debt) to the accompanying Consolidated Financial Statements.
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 3 (Inventory Financing Agreements) to the accompanying Consolidated Financial Statements.
Contractual Obligations
Except as disclosed under Note 6 (Long-Term Debt) to the accompanying Consolidated Financial Statements, thereThere 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, 2017.2018.

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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 11 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements.Statements is incorporated herein by reference.
Critical Accounting Policies and Estimates
During the six months ended June 30, 2018, we adopted the requirements of Topic 606. See Note 1 (Description of Business and Summary of Significant Accounting Policies) to the accompanying Consolidated Financial Statements for information regarding our new revenue recognitionOur critical accounting policy.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, 2018.

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Recent Accounting Pronouncements
The information set forth in Note 2 (Recent Accounting Pronouncements) to the accompanying Consolidated Financial Statements 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 analysisanalyses 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," "should," "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, 20172018 and from time to time in our subsequent Quarterly Reports on Form 10-Q and our other SECUS Securities and Exchange Commission ("SEC") filings. These factors include, among others, global and regional economic and political conditions; decreases in spending on technology products and services; 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 and failure to protect our information technology systems from cybersecurity threats; 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; increases in the cost of commercial delivery services or disruptions of those 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; changes in laws, including the recent US tax legislation, regulations or interpretations thereof; 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, 20172018 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 importantcould cause actual results to you.differ from our expectations. 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

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expect. The forward-looking statements 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.

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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 aboutof Market Risk"Risks" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.2018. As of June 30, 2018,March 31, 2019, there have been no material changes in this information.
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 three months ended June 30, 2018March 31, 2019 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 11 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements included in Part I, Item 1 "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, 2017.2018.
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 three months ended June 30, 2018March 31, 2019 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, 2018 0.3
 $70.35
 0.3
 $730.7
May 1 through May 31, 2018 0.2
 $78.04
 0.2
 $711.4
June 1 through June 30, 2018 0.4
 $83.43
 0.4
 $681.6
Total 0.9
 

 0.9
  
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)
January 1 through January 31, 2019 0.5
 $80.57
 0.5
 $298.6
February 1 through February 28, 2019 0.7
 $92.86
 0.7
 $1,229.1
March 1 through March 31, 2019 0.7
 $95.61
 0.7
 $1,158.7
Total 1.9
   1.9
  
(1)The amounts presented in this column are the remaining total authorized value to be spent after each month's repurchases. On August 3, 2017, the Company announced that its Board of Directors authorized a $750 million increase to the share repurchase program under which the Company may repurchase shares of its common stock in the open market through privately negotiated or other transactions, depending on share price, market conditions and other factors. On February 7, 2019, the Company announced that its Board of Directors authorized a $1.0 billion increase to the share repurchase program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.


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Item 6. Exhibits
Exhibit  Description
   
3.110.1 
Fifth AmendedCompensation Protection Agreement by and Restated Certificateamong CDW Corporation, CDW LLC and Christine A. Leahy, effective as of Incorporation of CDW Corporation,January 1, 2020, previously filed as Exhibit 3.110.1 with CDW Corporation’s Amendment No. 2 to Form S-18-K filed on June 14, 2013 (Reg. No. 333-187472)March 11, 2019 and incorporated herein by reference.

   
3.1.110.2 
CertificateForm of Amendment to Fifth AmendedCompensation Protection Agreement (effective on and Restated Certificate of Incorporation of CDW Corporation,after January 1, 2020), previously filed as Exhibit 3.110.2 with CDW Corporation'sCorporation’s Form 8-K filed on May 19, 2016March 11, 2019 and incorporated herein by reference.

3.1.2
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 25, 2018 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
**These items are furnished and not filed.




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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 2, 2018May 1, 2019 By: /s/ Collin B. Kebo
     Collin B. Kebo
     Senior Vice President and Chief Financial Officer
     (Duly authorized officer and principal financial officer)




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