CDW 2015 Annual Report Download - page 42

Table of Contents
Incomefromoperations
Income from operations by segment, in dollars and as a percentage of Net sales, and the year-over-year percentage change in Income from operations for the years
ended December 31, 2014 and 2013 is as follows:
Years Ended December 31,
2014
2013
Dollars in
Millions
Operating
Margin
Dollars in
Millions
Operating
Margin
Percent Change
in Income
from Operations
Segments: (1)
Corporate
$ 439.8
6.8%
$ 363.3
6.1%
21.1%
Public
313.2
6.4
246.5
5.9
27.1
Other
32.9
4.6
27.2
4.2
20.9
Headquarters (2)
(112.9)
nm*
(128.4)
nm*
12.0
Total Income from operations
$ 673.0
5.6%
$ 508.6
4.7%
32.3%
* Not meaningful
(1) Segment income from operations includes the segment’s direct operating income and allocations for Headquarters’ costs, allocations for income and expenses from
logistics services, certain inventory adjustments and volume rebates and cooperative advertising from vendors.
(2) Includes certain Headquarters’ function costs that are not allocated to the segments.
Income from operations was $673.0 million in 2014, an increase of $164.4 million, or 32.3%, compared to $508.6 million in 2013. The increase in Income from
operations was driven by higher Net sales and Gross profit and the absence of IPO-related costs. Total operating margin percentage increased 90 basis points to 5.6% in
2014, from 4.7% in 2013. Operating margin percentage benefited from the decrease in Selling and administrative expenses as a percentage of Net sales, which was driven by
the absence of $74.3 million in costs related to our IPO in 2013, and was partially offset by a decrease in Gross profit margin.
Corporate segment income from operations was $439.8 million in 2014, an increase of $76.5 million, or 21.1%, compared to $363.3 million in 2013. This increase
was primarily driven by higher net sales and gross profit. Corporate segment operating margin percentage increased 70 basis points to 6.8% in 2014, from 6.1% in 2013.
Operating margin percentage benefited from the decrease in selling and administrative expenses as a percentage of net sales, which was driven by the absence of costs related
to our IPO in 2013, and was partially offset by a decrease in gross profit margin.
Public segment income from operations was $313.2 million in 2014, an increase of $66.7 million, or 27.1%, compared to $246.5 million in 2013. This increase was
primarily driven by higher net sales and gross profit. Public segment operating margin percentage increased 50 basis points to 6.4% in 2014, from 5.9% in 2013. Operating
margin percentage benefited from the decrease in selling and administrative expenses as a percentage of net sales, which was driven by the absence of costs related to our
IPO in 2013, and was partially offset by a decrease in gross profit margin.
Interestexpense,net
At December 31, 2014, our outstanding long-term debt totaled $3,166.0 million, compared to $3,226.0 million at December 31, 2013. We reduced our long-term
debt during 2014 through refinancing activities to redeem our higher interest debt. Net interest expense in 2014 was $197.3 million, a decrease of $52.8 million, compared to
$250.1 million in 2013. This decrease was primarily due to lower debt balances and effective interest rates for 2014, compared to 2013 as a result of debt repayments and
refinancing activities completed during 2014 and 2013.
Netlossonextinguishmentsoflong-termdebt
For information regarding our debt, see Note 8 (Long-Term Debt) to the accompanying Consolidated Financial Statements. During 2014, we recorded a net loss on
extinguishments of long-term debt of $90.7 million compared to $64.0 million in 2013.
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