CDW 2012 Annual Report Download - page 85

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2012, 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.
The Company entered into a management services agreement with the Equity Sponsors pursuant to which they have agreed to provide it
with management and consulting services and financial and other advisory services. Pursuant to such agreement, the Equity Sponsors
receive an annual management fee of $5.0 million and reimbursement of out-of-pocket expenses incurred in connection with the
provision of such services. Such amounts are classified as selling and administrative expenses within the consolidated statements of
operations. The management services agreement includes customary indemnification and provisions in favor of the Equity Sponsors.
Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the
chief operating decision-maker for making decisions and assessing performance as the source of the Company's reportable segments.
The Company's segments are organized in a manner consistent with which separate financial information is available and evaluated
regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance.
The Company has two reportable segments: Corporate, which is comprised primarily of business customers, and Public, which is
comprised of government entities and education and healthcare institutions. The Company also has two
other operating segments, CDW
Advanced Services and Canada, which do not meet the reportable segment quantitative thresholds and, accordingly, are combined
together as “Other.”
The Company has centralized logistics and headquarters functions that provide services to the segments. The logistics function includes
purchasing, distribution and fulfillment services to support both the Corporate and Public segments. As a result, costs and intercompany
charges associated with the logistics function are fully allocated to both of these segments based on a percent of sales. The centralized
headquarters function provides services in areas such as accounting, information technology, marketing, legal and coworker services.
Headquarters' function costs that are not allocated to the segments are included under the heading of “Headquarters”
in the tables below.
Depreciation expense is included in Headquarters as it is not allocated among segments or used in measuring segment performance.
The Company allocates resources to and evaluates performance of its segments based on net sales, income (loss) from operations and
Adjusted EBITDA, a non-GAAP measure as defined in the Company's credit agreements. However, the Company has concluded that
income (loss) from operations is the more useful measure in terms of discussion of operating results, as it is a GAAP measure.
Segment information for total assets and capital expenditures is not presented, as such information is not used in measuring segment
performance or allocating resources between segments.
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15.
Related Party Transactions
16.
Segment Information