CDW 2012 Annual Report Download - page 34

Table of Contents
Selling and administrative expenses
Selling and administrative expenses increased $58.0 million, or 6.2%, to $990.1 million in 2011, compared to $932.1 million in 2010.
The increase was primarily due to higher payroll costs of $62.1 million driven by increased sales commissions and other variable compensation
costs consistent with higher sales and gross profit and an increase in the number of coworkers in 2011. Our sales force increased to 3,636
coworkers at December 31, 2011, compared to 3,405 coworkers at December 31, 2010, while total coworker count increased to 6,745 coworkers
at December 31, 2011, compared to 6,268 coworkers at December 31, 2010. We also had increases in profit sharing/401(k) expense of $4.9
million, travel and entertainment expense of $3.7 million and bad debt expense of $2.7 million. These increases were partially offset by lower
consulting and debt-related professional fees of $10.0 million, lower depreciation and amortization expense of $4.2 million, lower healthcare
benefits expense of $3.6 million and lower sales and use tax expense of $3.3 million.
Advertising expense
Advertising expense increased $16.7 million, or 15.7%, to $122.7 million in 2011, compared to $106.0 million in 2010. Higher
expenses were due to increased spending on web-based advertising, TV advertising and customer-focused marketing events. As a percentage of
net sales, advertising expense was 1.3% in 2011, compared to 1.2% in 2010.
Income from operations
The following table presents income (loss) from operations by segment, in dollars and as a percentage of net sales, and the year-over-
year percentage change in income (loss) from operations for the years ended December 31, 2011 and 2010:
Income from operations was $470.7 million in 2011, an increase of $118.0 million, or 33.5%, compared to $352.7 million in 2010. This
increase was driven by higher net sales and gross profit, partially offset by higher advertising expense and selling and administrative expenses.
Corporate segment income from operations was $331.6 million in 2011, an increase of $75.4 million, or 29.4%, compared to $256.2
million in 2010. The increase in Corporate segment income from operations was primarily driven by higher net sales and gross profit margin,
partially offset by higher selling and administrative costs, resulting in a net increase before allocations of $49.6 million in 2011 compared to
2010. In addition, Corporate segment income from operations benefited from an increase of $28.3 million in income allocations from our
logistics operations in 2011 compared to 2010. The improved profitability of our logistics operations was driven by stronger operating leverage
given higher purchase volumes while support structure costs remained flat. Partially offsetting the above items was an increase in Headquarters'
expense allocations to the Corporate segment of $2.5 million.
Public segment income from operations was $233.3 million in 2011, an increase of $40.3 million, or 20.9%, compared to $193.0
million in 2010. The increase reflected higher operating income before allocations of $25.9 million as a result of higher net sales and gross profit
margin, partially offset by higher selling and administrative costs. In addition, Public segment income from operations benefited from an
increase of $15.1 million in income allocations from our logistics operations in 2011 compared to 2010.
30
Year Ended December 31, 2011 Year Ended December 31, 2010
Dollars in
Millions
Operating
Margin
Percentage
Dollars in
Millions
Operating
Margin
Percentage
Percent Change
in Income (Loss)
from Operations
Segments:
(1)
Corporate
$
331.6
6.2
%
$
256.2
5.3
%
29.4
%
Public
233.3
6.2
193.0
5.4
20.9
Other
17.5
3.4
14.3
3.5
22.3
Headquarters
(2)
(111.7
)
nm
(110.8
)
nm
(0.8
)
Total income from operations
$
470.7
4.9
%
$
352.7
4.0
%
33.5
%
(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.