01—Abstract
Summary
Summary of the 10-K filed March 5, 2014. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation (NASDAQ: CDW) reported 2013 net sales of $10,768.6 milliona, up $640.4 million, or 6.3%, from $10,128.2 million in 2012.
Gross profit rose to $1,760.3 millionb, though gross margin slipped to 16.3% from 16.5%. Income from operations was $508.6 million, roughly flat versus $510.6 million, as the company absorbed $75.0 million of IPO- and secondary-offering related expenses. Net income increased to $132.8 million from $119.0 million, and diluted EPS was $0.84.
Adjusted EBITDA rose 5.5% to $808.5 millionc, and Non-GAAP net income rose 27.2% to $314.3 million. The company completed its IPO on July 2, 2013 at $17.00 per share, generating net proceeds of $424.7 million, which were used largely to pay down debt. Long-term debt fell to $3,251.2 million from $3,771.0 million, and shareholders' equity increased to $711.7 million from $136.5 million.
Sponsors Madison Dearborn and Providence Equity still beneficially owned approximately 63.7% of common stock. The company declared a quarterly dividend of $0.0425d per share, or $0.17 per year.
Government sales declined 10.3% in 2013 due to sequestration and a 16-day partial federal shutdown, while education sales grew 21.5%. Key risks highlighted in the filing include dependence on vendor partners (no long-term contracts), concentration in products from Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft (about 56% of 2013 net sales), a substantial debt load with restrictive covenants, and approximately $395.5 million of deferred cancellation of debt income that could become taxable if an impairment transaction occurs before 2018.
02—Key points
Key Highlights
- Net sales of $10,768.6 million in 2013, up 6.3% from $10,128.2 million in 2012.
- Gross profit of $1,760.3 million; gross margin of 16.3% versus 16.5% in 2012.
- Income from operations of $508.6 million, including $75.0 million of IPO- and secondary-offering related expenses.
- Net income of $132.8 million ($0.84 diluted EPS) versus $119.0 million in 2012; Adjusted EBITDA of $808.5 million, up 5.5%.
- IPO on July 2, 2013 at $17.00 per share generated net proceeds of $424.7 million, used to reduce long-term debt from $3,771.0 million to $3,251.2 million.
- Public segment government sales fell 10.3% due to sequestration and a 16-day federal shutdown, while education sales rose 21.5%.
- Sponsors beneficially owned approximately 63.7% of common stock; quarterly dividend of $0.0425 per share declared.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, CDW kept $0.01.
- Revenue$10.77B100.0%
- Cost of revenue−$9.01B83.7%
- Gross profit$1.76B16.3%
- Operating costs−$1.25B11.6%
- Operating income$508.6M4.7%
- Interest, other & tax−$375.8M3.5%
- Net income$132.8M1.2%
Where FY2013 revenue went
$10.77B- Cost of revenue: $9.01B, 84% of revenue
- Net income: $132.8M, 1.2% of revenue
- SG&A: $1.12B, 10% of revenue
- Other operating costs: $130.8M, 1.2% of revenue
- Interest, other & tax: $375.8M, 3.5% of revenue
Kept 1.2% as net incomeNet income $132.8M · 1.2%Other operating costs $130.8M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed March 5, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $10.77B$10.13B | +6.3% |
| Cost of Revenue | $9.01B$8.46B | +6.5% |
| Gross Profit | $1.76B$1.67B | +5.4% |
| SG&A Expenses | $1.12B$1.03B | +8.9% |
| Operating Income | $508.60M$510.60M | −0.4% |
| Interest Expense | $250.10M$307.40M | −18.6% |
| Net Income | $132.80M$119.00M | +11.6% |
| EPS (Basic) | $0.85$0.82 | +3.7% |
| EPS (Diluted) | $0.84$0.82 | +2.4% |
| Shares Outstanding (Basic) | 156.60M145.10M | +7.9% |
| Shares Outstanding (Diluted) | 158.70M145.80M | +8.8% |
05—Questions
Frequently Asked Questions
How did CDW perform financially in 2013?
Net sales grew 6.3% to $10,768.6 million and net income rose to $132.8 million from $119.0 million. Income from operations was roughly flat at $508.6 million because of $75.0 million in IPO-related expenses.
What did the IPO accomplish for the company?
The July 2, 2013 IPO sold shares at $17.00 and generated net proceeds of $424.7 million. The company used a portion of these proceeds to pay a $24.4 million termination fee to Sponsor affiliates and to redeem senior secured and senior subordinated notes, reducing long-term debt to $3,251.2 million.
What are the main risks to investors?
The filing cites dependence on vendor partners without long-term contracts, concentration in a few brands (about 56% of 2013 net sales), public-sector spending sensitivity, substantial indebtedness with restrictive covenants, and $395.5 million of deferred cancellation of debt income that could be accelerated into taxable income by an impairment transaction before 2018.
Will CDW continue paying dividends?
The board declared a quarterly cash dividend of $0.0425 per share, or $0.17 per year, and expects to continue. The filing states that future payments remain at the board's discretion and are limited by debt covenants and by the 110% test tied to deferred cancellation of debt income.
How concentrated is CDW's customer and vendor base?
Sales to the U.S. federal government were about 7% of 2013 net sales, and the next five largest customers together were about 3%. Hewlett-Packard and Cisco products represented 20% and 14% of 2013 net sales, respectively.
06—Continue