CDW 2012 Annual Report Download - page 26

Table of Contents
result in reduced or deferred spending by our customers on information technology products and services and increased competitive
pricing pressures.
Key Business Metrics
Our management monitors a number of financial and non-financial measures and ratios on a regular basis in order to track the progress
of our business and make adjustments as necessary. We believe that the most important of these measures and ratios include average daily sales,
gross margin, operating margin, EBITDA and Adjusted EBITDA, 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), 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. Adjusted EBITDA, a non-GAAP financial measure, also provides helpful information as it is the primary measure used in certain
financial covenants contained in our senior credit facilities. In addition to net sales, gross profit, operating income and net income discussed
above, the following are the results of other key measures in 2012 compared to 2011:
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• Our Public segment sales are impacted by government spending policies, budget priorities and revenue levels. An adverse change in
any of these factors could cause our Public segment customers to reduce their purchases or to terminate or not renew contracts with us,
which could adversely affect our business, results of operations or cash flows. Although our sales to the federal government are
diversified across multiple agencies and departments, they collectively accounted for approximately 10%, 10% and 11% of our net sales
in 2012, 2011 and 2010, respectively.
• We believe that the transition to more complex technology solutions will continue as important growth areas for us in the future. The
market for technology products and services is highly competitive. Competition is based on the ability to tailor specific solutions to
customer needs, quality and breadth of product and service offerings, knowledge and expertise of sales force, customer service, price,
product availability, speed of delivery and credit availability.
• Average daily sales increased 5.9% to $39.9 million
.
• Adjusted EBITDA increased 6.9% to $766.6 million
.
• The cash conversion cycle decreased from 27 days to 24
days.
•
Net debt (defined as long
-term debt minus cash and cash equivalents) decreased $233.0 million from $3,966.1 million to $3,733.1
million.
• The senior secured leverage ratio (as defined in our credit agreements) decreased from 2.7 to 2.4
.
•
The net leverage ratio (as defined in our credit agreements) decreased from 5.9 to 5.2.