01—Abstract
Summary
Summary of the 10-K filed February 26, 2015. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation's 2014 Form 10-K reports net sales of $12,074.5 milliona, up $1,305.9 million, or 12.1%, from $10,768.6 million in 2013, driven by client device refresh and K-12 digital testing demand.
Gross profit rose to $1,921.3 millionb, though gross margin declined to 15.9% from 16.3%. Income from operations increased 32.3% to $673.0 million, and net income more than doubled from $132.8 million to $244.9 million, helped by the absence of roughly $75.0 million in 2013 IPO-related expenses. Adjusted EBITDA reached $907.0 million, up 12.2%, and Non-GAAP net income rose 30.4% to $409.9 million.
The company ended 2014 with $344.5 millionc of cash and $3,190.0 million of long-term debt, and it used 2014 to refinance higher-cost notes, including issuing $600.0 million of 6.0% Senior Notes due 2022 and $575.0 million of 5.5% Senior Notes due 2024. The Revolving Loan was upsized to $1,250.0 million, with $935.6 million available for additional borrowing at year-end. Net cash from operating activities was $435.0 million, and the company declared a $0.0675 quarterly dividend in February 2015 and authorized a $500 million share repurchase program, under which no shares had been repurchased as of the filing date.
Investors should weigh the company's concentration risks: the federal government accounted for about 7%d of 2014 net sales, and products from Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft made up about 54% of net sales. The Sponsors, Madison Dearborn and Providence Equity, still held 15.5% and 13.7% of common stock, and the company disclosed a deferred cancellation of debt income tax liability that accelerates upon certain distributions.
02—Key points
Key Highlights
- Net sales rose 12.1% to $12,074.5 million in 2014, led by Corporate (up 8.6%) and Public (up 17.2%) segments.
- Income from operations increased 32.3% to $673.0 million, with operating margin up to 5.6% from 4.7%.
- Gross profit margin declined to 15.9% from 16.3%, pressured by price/mix changes in notebooks and desktops.
- Net income was $244.9 million versus $132.8 million in 2013; 2013 results included $75.0 million of IPO-related expenses.
- Adjusted EBITDA rose 12.2% to $907.0 million; Non-GAAP net income rose 30.4% to $409.9 million.
- Total long-term debt was reduced to $3,190.0 million, with multiple 2014 refinancings and a new $1,250.0 million Revolving Loan.
- A $500 million share repurchase program was authorized in November 2014, and the quarterly dividend was raised to $0.0675 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, CDW kept $0.02.
- Revenue$12.07B100.0%
- Cost of revenue−$10.15B84.1%
- Gross profit$1.92B15.9%
- Operating costs−$1.25B10.3%
- Operating income$673.0M5.6%
- Interest, other & tax−$428.1M3.5%
- Net income$244.9M2.0%
Where FY2014 revenue went
$12.07B- Cost of revenue: $10.15B, 84% of revenue
- Net income: $244.9M, 2.0% of revenue
- SG&A: $1.11B, 9.2% of revenue
- Other operating costs: $138.0M, 1.1% of revenue
- Interest, other & tax: $428.1M, 3.5% of revenue
Kept 2.0% as net incomeNet income $244.9M · 2.0%Other operating costs $138.0M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 26, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $12.07B$10.77B | +12.1% |
| Cost of Revenue | $10.15B$9.01B | +12.7% |
| Gross Profit | $1.92B$1.76B | +9.1% |
| SG&A Expenses | $1.11B$1.12B | −0.9% |
| Operating Income | $673.00M$508.60M | +32.3% |
| Net Income | $244.90M$132.80M | +84.4% |
| EPS (Basic) | $1.44$0.85 | +69.4% |
| EPS (Diluted) | $1.42$0.84 | +69.0% |
| Shares Outstanding (Basic) | 170.60M156.60M | +8.9% |
| Shares Outstanding (Diluted) | 172.80M158.70M | +8.9% |
05—Questions
Frequently Asked Questions
What drove the growth in net sales in 2014?
Net sales grew $1,305.9 million to $12,074.5 million, primarily from transactional products such as notebooks/mobile devices and desktops as customers refreshed client devices and K-12 customers prepared for digital testing requirements. Public segment education sales rose 25.9%, and government sales rose 15.9%.
How much debt does CDW carry and how has it changed?
Long-term debt totaled $3,190.0 million at December 31, 2014, down from $3,251.2 million a year earlier. During 2014 the company issued $600.0 million of 6.0% Senior Notes due 2022 and $575.0 million of 5.5% Senior Notes due 2024 and redeemed several higher-interest notes.
How concentrated is CDW's revenue?
Sales to the U.S. federal government were approximately 7% of 2014 net sales. Sales of products manufactured by Apple, Cisco, EMC, Hewlett-Packard, Lenovo and Microsoft represented about 54% of net sales, with Hewlett-Packard and Cisco at 18% and 14%, respectively.
What shareholder returns are available?
The company declared a $0.0675 quarterly dividend in February 2015, payable March 10, 2015, and approved a $500 million share repurchase program in November 2014. As of the filing date, no shares had been repurchased under the program.
What are the main risks flagged in the filing?
Key risks include reduced public-sector spending, dependence on vendor partner programs and product availability, intense competition, and substantial indebtedness with variable-rate exposure of $1,513.5 million. The company also has deferred cancellation of debt income that could accelerate into current taxable income upon certain distributions before 2018.
06—Continue