CDW 2014 Annual Report Download - page 57

Table of Contents
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. The following table presents the components of our cash conversion cycle:
The cash conversion cycle decreased to 21 days at December 31, 2014 compared to 23 days at December 31, 2013, primarily driven by
improvement in DSO. The decline in DSO was primarily driven by improved collections and early payments from certain customers.
Additionally, the timing of inventory receipts at the end of 2014 had a favorable impact on DIO and an unfavorable impact on DPO.
The cash conversion cycle decreased to 23 days at December 31, 2013 compared to 24 days at December 31, 2012. The increase in
DSO was primarily driven by an increase in receivables for third-party services such as software assurance and warranties. These services have
an unfavorable impact on DSO as the receivable is recognized on the balance sheet on a gross basis while the corresponding sales amount in the
statement of operations is recorded on a net basis. The DPO increase was primarily due to an increase in payables for third-party services, which
offsets the related increase in DSO discussed above. These services have a favorable impact on DPO as the payable is recognized on the balance
sheet 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. The timing of quarter-end payments also had a favorable impact on DPO at December 31, 2013.
Investing Activities
Net cash used in investing activities increased $117.7 million in 2014 compared to 2013 . We paid $86.8 million
in the fourth quarter of
2014 to acquire a 35% non-controlling interest in Kelway. Additionally, capital expenditures increased $7.9 million to $55.0 million from $47.1
million for 2014 and 2013 , respectively, primarily for improvements to our information technology systems during both years.
Net cash used in investing activities increased $5.4 million in 2013 compared to 2012. Capital expenditures were $47.1 million and
$41.4 million for 2013 and 2012, respectively, primarily for improvements to our information technology systems during both years.
Financing Activities
Net cash used in financing activities decreased $56.3 million in 2014 compared to 2013 . The decrease was primarily driven by several
debt refinancing transactions during each period and our July 2013 IPO, which generated net proceeds of $424.7 million after deducting
underwriting discounts, expenses and transaction costs. The net impact of our debt transactions resulted in cash outflows of $161.3 million and
$569.4 million during 2014 and 2013 , respectively, as cash was used in each period to reduce our total long-term debt. See Note 7 to the
accompanying audited consolidated financial statements included elsewhere in this report for a description of the debt transactions impacting
each period.
Net cash used in financing activities decreased $169.7 million in 2013 compared to 2012. The decrease was primarily driven by various
debt transactions during each period and our July 2013 IPO, which generated net proceeds of $424.7 million after deducting underwriting
discounts, expenses and transaction costs. The net impact of our debt transactions resulted
52
(in days) December 31,
2014
2013 2012
Days of sales outstanding (DSO)
(1)
42
44
42
Days of supply in inventory (DIO)
(2)
13
14
14
Days of purchases outstanding (DPO)
(3)
(34
)
(35
)
(32
)
Cash conversion cycle
21
23
24
(1) Represents the rolling three-month average of the balance of trade 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.
(2) Represents the rolling three-month average of the balance of inventory at the end of the period divided by average daily cost of goods
sold for the same three-month period. The prior period has been revised to conform to the current definition.
(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 goods sold for the same three-month period.