CDW 2015 Annual Report Download - page 31

Table of Contents
(g) Includes the impact of consolidating five months for the year ended December 31, 2015 of Kelway’s financial results.
(5) Includes the impact of consolidating five months for the year ended December 31, 2015 of Kelway’s financial results.
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 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 North America and the United Kingdom. We help
our customer base of over 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 including more than 100,000 products from more
than 1,000 brands. We provide our products and solutions through more than 5,000 customer-facing coworkers, including field sellers, highly-skilled technology specialists
and advanced service delivery engineers.
We are a leading sales channel partner in North America and the United Kingdom 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.
On August 1, 2015, we completed the acquisition of Kelway TopCo Limited (“Kelway”) by purchasing the remaining 65% of its outstanding common stock which
increased our ownership interest from 35% to 100%, and provided us control. Kelway is a U.K.-based IT solutions provider, which has global supply chain relationships that
enable it to conduct business in more than 80 countries . This investment strengthens our ability to provide a more comprehensive solution to our customers and enhances our
ability to serve our existing multi-national customers. We included the financial results of Kelway in our Consolidated Financial Statements from the date of acquisition. For
additional information relating to the acquisition, see Note 3 (Acquisition) to our Consolidated Financial Statements.
We have two reportable segments: Corporate, which is comprised primarily of private sector business customers in the U.S., and Public, which is comprised of
government agencies and education and healthcare institutions in the U.S. 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, each of which do not meet the reportable segment quantitative thresholds and, accordingly, are included
in an all other category (“Other”). For additional information relating to Kelway, see Note 3 (Acquisition) to these Consolidated Financial Statements. 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. Effective January 1, 2016, the CDW Advanced Services business will be included in our Corporate and Public segments and Other will be
comprised of Canada and Kelway. Revenues in the U.S. 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
programs with our vendor partners. These programs are at the discretion of our vendor partners and are typically tied to sales or other commitments to be met by us within a
specified period of time.
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