CDW 2015 Annual Report Download - page 41

Table of Contents
Corporate segment net sales in 2014 increased $515.4 million, or 8.6%, compared to 2013, driven by sales growth in the medium/large customer channel. Within
our Corporate segment, net sales to medium/large customers increased $432.7 million, or 8.6%, year over year, primarily due to customers refreshing their client devices and
making continued investments in technology infrastructure and a continued focus on seller productivity. This increase was led by growth in notebooks/mobile devices,
netcomm products, software, and desktop computers. Net sales to small business customers increased $82.7 million, or 9.1%, year over year, driven by growth in
notebooks/mobile devices and desktop computers due to customers refreshing their client devices.
Public segment net sales in 2014 increased $714.9 million, or 17.2%, year over year, driven by strong performance across all channels. In 2013, and through the
second quarter of 2014, Public segment results were impacted by the combined and residual negative effects of sequestration, the partial shutdown of the federal government
in 2013 and federal government budget uncertainty. However, with the finalization of federal budget allocations in early 2014, we began to see improvement in federal sales
in the second quarter of 2014 and saw continued momentum through the third quarter of 2014 in conjunction with the federal fiscal year-end. This recovery continued into
the fourth quarter of 2014 in connection with increased customer confidence that a federal budget for 2015 would be in place. Net sales to government customers increased
$198.8 million, or 15.9%. The increase in net sales to the federal government was led by increases in sales of notebooks/mobile devices and desktop computers. The increase
in net sales to state/local government customers was led by growth in sales of notebooks/mobile devices, netcomm products, enterprise storage, and software due to a
continued focus on public safety solutions. Net sales to education customers increased $375.0 million, or 25.9%, year over year, led by growth in net sales to K-12
customers, reflecting increased sales of notebooks/mobile devices to support digital testing requirements. Net sales to healthcare customers increased $141.1 million, or
9.6%, between periods, driven by growth in netcomm products, notebook/mobile devices, and desktop computers.
Grossprofit
Gross profit increased $161.0 million, or 9.1%, to $1,921.3 million in 2014, compared to $1,760.3 million in 2013. As a percentage of Net sales, Gross profit
decreased 40 basis points to 15.9% during 2014, down from 16.3% in 2013. Gross profit margin was negatively impacted 30 basis points by unfavorable price/mix changes
within product margin, as transactional product categories such as notebooks/mobile devices and desktops experienced a higher rate of net sales growth than our overall net
sales growth, accompanied by continuing product margin compression in these product categories. Additionally, we experienced an unfavorable impact of 10 basis points
from vendor funding in 2014. Although vendor funding dollars increased, it represented a lower percentage of Net sales in 2014 compared to 2013. Vendor 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 decreased $10.6 million, or 0.9%, to $1,110.3 million in 2014, compared to $1,120.9 million in 2013. The overall decrease was
largely driven by the absence of $74.3 million in costs incurred during 2013 related to the completion of our IPO. This decrease was partially offset by an increase of $31.4
million, or 14.3%, of certain coworker costs between years which was primarily due to higher compensation consistent with increased coworker count and attainment-based
compensation accruals tied to annual performance. Total coworker count was 7,211, up 244 from 6,967 at December 31, 2013. In addition, sales payroll, including sales
commissions and other variable compensation costs, increased $18.6 million, or 3.9% between years, consistent with higher sales and Gross profit. Further offsetting the
decrease in Selling and administrative expenses was an increase in long-term compensation expense and equity compensation expense of $7.2 million during 2014.
As a percentage of Net sales, Selling and administrative expenses decreased 120 basis points to 9.2% in 2014, down from 10.4% in 2013. The decrease in Selling
and administrative expenses as a percentage of Net sales was largely driven by a decline of 70 basis points in costs related to the IPO in 2013. Sales payroll as a percentage of
Net sales also decreased 30 basis points during 2014, reflecting the lower cost to serve transactional sales compared to solutions-focused sales, consistent with our variable
compensation cost structure.
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