CDW 2015 Annual Report Download - page 35

Table of Contents
computers and point-of-care technology carts, as some of our larger customers shifted priorities to reducing costs due to industry consolidation.
Net sales in Other in 2015 increased $327.2 million , or 45.5% , compared 2014 . Other is comprised of CDW Advanced Services, Canada and Kelway. The
increase in net sales was driven by the impact of consolidating five months of Kelway net sales, as well as growth in CDW Advanced Services, partially offset by a decline in
the U.S. dollar-denominated net sales of Canada. The net sales of Canada in constant currency continued to grow during 2015 compared to 2014 .
Grossprofit
Gross profit increased $194.5 million , or 10.1% , to $2,115.8 million in 2015 , compared to $1,921.3 million in 2014 . As a percentage of net sales, Gross profit
increased 40 basis points to 16.3% in 2015 , from 15.9% in 2014 .
Net service contract revenue, including items such as third-party services, warranties and SaaS contributed a positive impact of 15 basis points to gross profit
margin as our cost paid to the vendor or third-party service provider is recorded as a reduction to net sales, resulting in net sales being equal to the gross profit on the
transaction. Gross profit margin was positively impacted 15 basis points due to a higher mix of services and improved product margin. We also experienced a favorable
impact of 10 basis points from vendor partner funding. Vendor partner funding includes purchase discounts, volume rebates and cooperative advertising.
Gross profit margin may fluctuate based on various factors, including vendor incentive and inventory price protection programs, cooperative advertising funds
classified as a reduction of cost of sales, product mix, net service contract revenue, commission revenue, pricing strategies, market conditions and other factors.
Sellingandadministrativeexpenses
Selling and administrative expenses increased $115.7 million , or 10.4% , to $1,226.0 million in 2015 , compared to $1,110.3 million in 2014 . As a percentage of
total Net sales, Selling and administrative expenses increased 20 basis points to 9.4% in 2015 , up from 9.2% in 2014 . Sales payroll costs increased $60.1 million, or
12.0%, year over year, primarily due to increased sales compensation consistent with growth in solutions-related sales, an increase in Gross profit and consolidating five
months of incremental Kelway sales payroll costs. In addition, certain coworker costs increased $9.5 million, or 3.8%, during 2015 compared to the prior year, due to higher
costs consistent with increased coworker count, primarily due to our acquisition of Kelway. Total coworker count was 8,465 at December 31, 2015 , up 1,254 from 7,211 at
December 31, 2014 . Amortization expense related to intangibles increased $16.7 million, or 9.2%, during 2015 compared to 2014 , primarily due to incremental
amortization expense related to the intangible assets arising from our acquisition of Kelway. Non-cash equity-based compensation expense increased $14.8 million, or
90.7%, during 2015 compared to 2014 , primarily due to annual equity awards granted under our 2013 Long-Term Incentive Plan in 2015, performance against long-term
incentive program targets and equity awards granted in connection with our acquisition of Kelway. In addition, we incurred $10.2 million of acquisition and integration costs
in 2015 related to our acquisition of Kelway.
Incomefromoperations
Income from operations by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change for the years ended December 31, 2015
and 2014 is as follows:
Years Ended December 31,
2015
2014
Dollars in
Millions
Operating
Margin
Dollars in
Millions
Operating
Margin
Percent Change
in Income
from Operations
Segments: (1)
Corporate
$ 470.1
6.9%
$ 439.8
6.8%
6.9%
Public
343.3
6.7
313.2
6.4
9.6
Other (2)
43.1
4.1
32.9
4.6
31.0
Headquarters (3)
(114.5)
nm*
(112.9)
nm*
1.4
Total Income from operations
$ 742.0
5.7%
$ 673.0
5.6%
10.3%
* Not meaningful
34