CDW 2014 Annual Report Download - page 99

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company's 35% non-controlling equity investment in Kelway was $119.2 million , which represented the excess of the purchase price
plus liabilities assumed less tangible assets acquired.
The Company had previously entered into a management services agreement with the Sponsors pursuant to which they had agreed to
provide it with management and consulting services and financial and other advisory services. Pursuant to such agreement, the
Sponsors received 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 were classified as selling and administrative expenses within the consolidated statements
of operations. The management services agreement included customary indemnification and provisions in favor of the Sponsors.
On July 2, 2013, the Company completed an IPO of its common stock. Using a portion of the net proceeds from the IPO, the Company
paid a $24.4 million termination fee to affiliates of the Sponsors in connection with the termination of the management services
agreement with such entities that was effective upon completion of the IPO. The Company paid an annual management fee of $2.5
million and $5.0 million in the years ended December 31, 2013 and 2012, respectively. There was no management fee paid for the year
ended December 31, 2014.
On March 20, 2014, the Company repurchased and subsequently canceled $25.0 million aggregate principal amount of the 2019 Senior
Notes from an affiliate of Providence Equity. See Note 7 for additional information related to this transaction.
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 three other operating segments,
CDW Advanced Services, Canada and Kelway, which do not meet the reportable segment quantitative thresholds and, accordingly, are
combined together as “Other.” In November 2014, the Company acquired a 35% non-
controlling equity interest in Kelway. See Note 15
for additional information on Kelway.
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.
IPO- and secondary-offering related expenses primarily relating to coworker compensation were included within operating segment
results for the year ended December 31, 2013. See Note 9 for additional discussion of IPO- and secondary-offering related expenses.
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.
90
16.
Related Party Transactions
17.
Segment Information