CDW 2014 Annual Report Download - page 49

Table of Contents
The gross profit margin may fluctuate based on various factors, including vendor incentive and inventory price protection programs,
cooperative advertising funds classified as a reduction of cost of sales, product mix, net service contract revenue, commission revenue, pricing
strategies, market conditions and other factors, any of which could result in changes in gross profit margins.
Selling and administrative expenses
Selling and administrative expenses increased $91.3 million , or 8.9% , to $1,120.9 million in 2013, compared to $1,029.5 million in
2012. As a percentage of total net sales, selling and administrative expenses increased 20 basis points to 10.4% in 2013, up from 10.2% in 2012.
Sales payroll, including sales commissions and other variable compensation costs, increased $28.9 million, or 6.4%, between years, consistent
with higher sales and gross profit. Additionally, selling and administrative expenses for 2013 included IPO- and secondary-offering related
expenses of $75.0 million, as follows:
We did not record any IPO- or secondary-offering related expenses during 2012. Partially offsetting these increases in 2013 was the
favorable resolution of a class action legal proceeding in which we were a claimant, which reduced selling and administrative expenses by $10.4
million in 2013 compared to 2012. Total coworker count increased by 163 coworkers, from 6,804 at December 31, 2012, to 6,967 at December
31, 2013.
Advertising expense
Advertising expense increased $1.3 million , or 0.9% , to $130.8 million in 2013, compared to $129.5 million in 2012. As a percentage
of net sales, advertising expense was 1.2% in 2013, compared to 1.3%
in 2012. The dollar increase in advertising expense was due to a continued
focus on advertising our solutions and products, which reinforces our reputation as a leading IT solutions provider.
Income from operations
The following table presents income from operations by segment, in dollars and as a percentage of net sales, and the year-over-year
percentage change in income from operations for the years ended December 31, 2013 and 2012:
* Not meaningful
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• Pre-tax charges of $36.7 million related to the acceleration of the expense recognition for certain equity awards and $4.0 million for the
related employer payroll taxes. See Note 10 of the accompanying audited consolidated financial statements for additional discussion of
the impact of the IPO on our equity awards.
• A pre-tax charge of $24.4 million related to the payment of a termination fee to affiliates of the Sponsors in connection with the
termination of the management services agreement with such entities.
• A pre-tax charge of $7.5 million related to compensation expense in connection with the Restricted Debt Unit Plan. See Note 12 of the
accompanying audited consolidated financial statements for additional discussion of this charge.
• Other IPO- and secondary-
offering related expenses of $2.4 million.
Year Ended December 31, 2013 Year Ended December 31, 2012
Dollars in
Millions
Operating
Margin
Percentage
Dollars in
Millions
Operating
Margin
Percentage
Percent Change
in Income
from Operations
Segments:
(1)
Corporate
$
363.3
6.1
%
$
349.0
6.3
%
4.1
%
Public
246.5
5.9
246.7
6.1
(0.1
)
Other
27.2
4.2
18.6
3.1
46.3
Headquarters
(2)
(128.4
)
nm*
(103.7
)
nm*
(23.8
)
Total income from operations
$
508.6
4.7
%
$
510.6
5.0
%
(0.4
)%
(1) Segment income (loss) from operations includes the segment’s direct operating income (loss) and allocations for Headquarters’ costs,
allocations for logistics services, certain inventory adjustments, and volume rebates and cooperative advertising from vendors.
(2) Includes Headquarters’
function costs that are not allocated to the segments.