CDW 2014 Annual Report Download - page 37

Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated or the context otherwise requires, as used in this “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” the terms “we,” “us,” “the Company,” “our,” “CDW”
and similar terms refer to CDW Corporation and
its subsidiaries. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with
the audited consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking
statements that are subject to numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-
looking statements. See “Forward-Looking Statements” above.
Overview
CDW is a Fortune 500 company and a leading provider of integrated information technology (“IT”) solutions in the U.S. and Canada.
We help our customer base of approximately 250,000 small, medium and large business, government, education and healthcare customers by
delivering critical solutions to their increasingly complex IT needs. Our broad array of offerings ranges from discrete hardware and software
products to integrated IT solutions such as mobility, security, data center optimization, cloud computing, virtualization and collaboration. We are
technology "agnostic," with a product portfolio that includes more than 100,000 products from more than 1,000
brands. We provide our products
and solutions through sales force and service delivery teams consisting of nearly 4,600 coworkers, including more than 1,800 field sellers,
highly-skilled technology specialists and advanced service delivery engineers.
We are a leading U.S. sales channel partner for many original equipment manufacturers (“OEMs”) and software publishers
(collectively, our “vendor partners”), whose products we sell or include in the solutions we offer. We believe we are an important extension of
our vendor partners' sales and marketing capabilities, providing them with a cost-effective way to reach customers and deliver a consistent brand
experience through our established end-market coverage and extensive customer access.
We have two reportable segments: Corporate, which is comprised primarily of private sector business customers, and Public, which is
comprised of government agencies and education and healthcare institutions. Our Corporate segment is divided into a medium/large business
customer channel, primarily serving customers with more than 100 employees, and a small business customer channel, primarily serving
customers with up to 100 employees. We also have three other operating segments, CDW Advanced Services, Canada and Kelway TopCo
Limited ("Kelway"), which do not meet the reportable segment quantitative thresholds and, accordingly, are combined together as “Other.” In
November 2014, we acquired a 35% non
-controlling equity interest in Kelway. See Note 15 to the accompanying audited consolidated financial
statements included elsewhere in this report for additional details.
The CDW Advanced Services business consists primarily of customized engineering services delivered by technology specialists and
engineers, and managed services that include Infrastructure as a Service (“IaaS”) offerings. Revenues from the sale of hardware, software,
custom configuration and third-party provided services are recorded within our Corporate and Public segments.
We may sell all or only select products that our vendor partners offer. Each vendor partner agreement provides for specific terms and
conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor
incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. We also resell software for major software
publishers. Our agreements with software publishers allow the end-user customer to acquire software or licensed products and services. In
addition to helping our customers determine the best software solutions for their needs, we help them manage their software agreements,
including warranties and renewals. A significant portion of our advertising and marketing expenses is reimbursed through cooperative
advertising reimbursement programs with our vendor partners. These programs are at the discretion of our vendor partners and are typically tied
to sales or purchasing volumes or other commitments to be met by us within a specified period of time.
Trends and Key Factors Affecting our Financial Performance
We believe the following trends may have an important impact on our financial performance:
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• Our Public segment sales are impacted by government spending policies, budget priorities and revenue levels. An adverse
change in any of these factors could cause our Public segment customers to reduce their purchases or to terminate or not renew
contracts with us, which could adversely affect our business, results of operations or cash flows. Although our sales to the
federal government are diversified across multiple