10 Solution Providers With The Most Debt In 2015
A New Partner Sits Atop The Largest Debt Pile
The 10 most debt-laden solution providers had a combined $20.8 billion of debt at the end of 2015, up dramatically from $13.51 billion the quarter before. Companies such as Capgemini, CSRA and PCM issued new tranche loans or extended their line of credit to pay for a flurry of acquisitions. For the first time in more than a year, a new solution provider has the dubious distinction of being the most debt-burdened. The list features two new entrants, with the eight returning solution providers all moving down at least one position in the rankings. Here are the 10 companies with the heaviest debt loads.
Methodology
To determine which of the 22 publicly traded companies in the 2014 or 2015 CRN Solution Provider 500 have the most debt, we pulled the total debt figures provided by Yahoo Finance. In instances where the numbers were not current, we took the formula used by Yahoo Finance and applied it to the company earnings for the most recent quarter.
Partner to Watch: PCM
Total Debt: $196.8 Million
Top Executive: Frank Khulusi, chairman and CEO
PCM’s debt load soared by 66.2 percent in the most recent quarter, from just $118.4 million in September. The El Segundo, Calif.-based company -- No. 29 on the CRN Solution Provider 500 -- increased its line of credit 96 percent, from $82.9 million the previous quarter to $162.4 this quarter, during which time PCM announced plans to acquire Acrodex for $12.3 million and Systemax’s North American Technology Group for $14 million. PCM’s current notes payable increased 170 percent over the quarter, from $4.78 million to $12.9 million, while long-term notes payable fell 30 percent, from $30.8 million to $21.5 million.
10. Insight Enterprises
Total Debt: $196.9 Million
Top Executive: Kenneth Lamneck, president and CEO
Insight’s debt load plummeted 25.2 percent in the past quarter, from $263.1 million in September. Some $90.5 million of that is long-term debt for the Tempe, Ariz.-based company, No. 13 on the CRN SP 500, consisting of $89 million for an accounts-receivable financing facility and $1.54 million for capital leasing obligations. During 2015, Insight had $28 million of combined net borrowings from its senior revolving credit facility and accounts receivable securitization facility. The solution provider also repurchased $91.8 million of its common stock last year.
9. Unisys
Total Debt: $312.3 Million
Top Executive: Peter Altabef, president and CEO
During a quarter defined by restructuring, Unisys increased its debt just 0.6 percent, from $310.3 million in September. Altabef said during the Blue Bell, Pa.-based company's earnings call in January that "a good amount of the company's challenges to date have been to some extent self-inflicted or at least inward-focused." In its most recent quarter, Unisys -- No. 19 on the CRN SP 500 -- saw a 6 percent decline in quarterly sales, factoring out changes in foreign currency exchange rates, and expects sales to decline an additional 3 percent to 6 percent during 2016.
8. CACI
Total Debt: $1 Billion
Top Executive: Ken Asbury, CEO
CACI -- No. 16 on the CRN SP 500 -- lowered its debt 1 percent, from $1.01 billion, in September, thanks to increased government spending. Although CACI's reported debt at the end of 2015 was $1 billion, after the acquisition of L-3's government services group, which closed in early 2016, the company's debt is now around $1.5 billion, according to Arlington, Va.-based CACI CFO Tom Mutryn. Asbury said the spending in late 2015 can be attributed to the passing of the Consolidated Appropriations Act and the Bipartisan Budget Act, which allowed U.S. government organizations to budget and spend more on technology.
7. Cognizant
Total Debt: $1.29 Billion
Top Executive: Francisco D’Souza, CEO
Cognizant’s debt skyrocketed 35.8 percent in the most recent quarter, from $950 million in September. Karen McLoughlin, CFO of Teaneck, N.J.-based Cognizant -- No. 8 on the CRN SP 500 -- said the accumulation of new debt was due to the company's strong business performance and strong cash flows. According to D'Souza, Cognizant’s strong performance in both health care and banking will not persist and will begin to soften in the beginning of 2016. However, by the end of the current fiscal year, D'Souza expects health care to again increase its investments in IT.
6. CGI
Total Debt: $1.59 Billion
Top Executive: Michael E. Roach, president and CEO
CGI decreased its debt 0.6 percent, from $1.6 billion last quarter. The Montreal-based company -- No. 15 on the CRN SP 500 -- in the most recent quarter partially repaid a tranche of the unsecured committed term loan credit facility that's slated to mature in May 2016. CGI cut its cash used in financing activities by $239.7 million, thanks to a repayment of $222.1 million under the term loan credit facility and $22 million spent last year to settle related cross-currency swaps.
5. CSC
Total Debt: $2.67 Billion
Top Executive: Mike Lawrie, president and CEO
CSC grew its debt 2.3 percent, from $2.61 billion three months before, with the current debt load consisting of $1.91 billion of long-term debt and $760 million of short-term borrowings. The Falls Church, Va.-based company -- No. 5 on the CRN SP 500 before spinning off CSRA -- had its British subsidiary borrow $298 million on Dec. 31 to pay down an outstanding loan. The latest loan is due in January 2019. In early 2016, CSC told the Bank of New York Mellon that it plans to redeem all of its outstanding notes by March 17 by using cash on hand and up to $675 million from its revolving credit facility.
4. SS&C Technologies
Total Debt: $2.75 Billion
Top Executive: William C. Stone, chairman of the board and CEO
SS&C Technologies brought its debt down 2.8 percent, from $2.83 billion, after making $2.7 billion in acquisitions in its most recent fiscal year. According to Stone, the Windsor, Conn.-based company -- No. 38 on the CRN SP 500 -- is looking to finalize yet another acquisition, Citi Alternative Investor services, in its first quarter of 2016, making SS&C the second largest fund administrator in the world after moving into the space 14 years ago. Stone said SS&C will look to utilize its new leverage to drive its debt down and increase profitability.
3. CSRA
Total Debt: $3.09 Billion
Top Executive: Larry Prior, president and CEO
CSRA reported $3.09 billion of debt in its first quarter as an independent company. The Falls Church, Va.-based company -- which was formed Nov. 30 by merging SRA and CSC's public sector business -- entered last quarter into a five-year revolving credit facility with a borrowing capacity of $700 million, three- and five-year secured tranche loans in the amounts of $600 million and $1.45 billion, respectively, and a seven-year secured term loan for $750 million. The loans have been used thus far to fund CSC's special dividend associated with the split, pay transaction costs, repay SRA's existing indebtedness and pay SRA stockholders the owed amount from the merger.
2. CDW
Total Debt: $3.7 Billion
Top Executive: Thomas Richards, chairman and CEO
CDW’s debt increased 2.2 percent over the past three months, from $3.62 billion in September. The Lincolnshire, Ill.-based company, No. 6 on the CRN SP 500, has long-term debt made up of $1.68 billion of notes due between 2022 and 2024 and $1.58 billion of secured term-loan facilities. Some $1.6 billion of CDW's $3.3 billion of long-term debt is secured. Kelway, a U.K.-based solution provider that CDW bought last year, is required to pay $2.9 million on its term loan each quarter, with the remaining principal -- which currently stands at $88.4 million -- due June 30, 2017.
1. Capgemini
Total Debt: $4.2 Billion
Top Executive: Paul Hermelin, CEO
Capgemini's debt soared by 52.2 percent over the past half-year, from just $2.76 billion on June 30. The debt for Paris-based Capgemini -- No. 5 on the 2014 CRN SP 500 -- consists of $3.44 billion of long-term debt, which includes $3.38 billion of bonds and $58.7 million of obligations under finance leases. The debt also includes $707 million of short-term borrowings, made up of $572 million of bonds, $88 million on drawdowns from banks and others and $47 million of obligations under finance leases. Capgemini issued a $2.99 billion "triple tranche" loan in late June to help finance its acquisition of Bridgewater, N.J.-based IGATE, with notes due in 2018, 2020 and 2023.