01—Abstract
Summary
Summary of the 10-K filed March 1, 2017. Cited figures are marked; the original filing is the authoritative source.
CDW Corporation reported 2016 Net sales of $13.98 billiona, up 7.6% from $12.99 billion in 2015, or 8.3% on a constant currency basis.
The increase reflected organic growth and seven additional months of incremental CDW UK sales, which were acquired on August 1, 2015. Income from operations rose 10.4% to $819.2 millionb, with operating margin up 20 basis points to 5.9%. Net income increased 5.3% to $424.4 million, and diluted EPS was $2.56.
Non-GAAP net income rose 13.0% to $569.0 millionc, and Adjusted EBITDA rose 9.7% to $1.12 billion. Cash flow from operations was $604.0 million in 2016, compared with $277.5 million in 2015. The company repurchased $367.4 million of common stock during 2016 and paid dividends of $78.7 million.
Total long-term debt was $3.2 billiond at year-end, and the Revolving Loan had $716 million of availability. On February 7, 2017, the board declared a quarterly dividend of $0.16 per share. The company also announced a $600 million offering of 5.0% Senior Notes due 2025, which will be used to redeem the 6.0% Senior Notes due 2022.
The filing states that the SEC is investigating the company's vendor partner program incentives, and that the company does not believe there is a reasonable possibility of a material loss exceeding amounts already recognized. The company identifies heavy reliance on vendor partners.
Products from Apple, Cisco, Dell, EMC, Hewlett Packard Enterprise, HP Inc., Lenovo and Microsoft represented nearly 60% of 2016 consolidated Net sales. Effective January 1, 2017, the company established Small Business as a separate reportable segment.
02—Key points
Key Highlights
- Net sales of $13,981.9 million in 2016, up 7.6% (8.3% constant currency) from $12,988.7 million in 2015.
- Income from operations of $819.2 million, up 10.4%; operating margin of 5.9% versus 5.7% in 2015.
- Net income of $424.4 million and diluted EPS of $2.56; Non-GAAP net income of $569.0 million, up 13.0%.
- Adjusted EBITDA of $1,117.3 million, up 9.7%, with an Adjusted EBITDA margin of 8.0%.
- Operating cash flow of $604.0 million, compared with $277.5 million in 2015; free cash flow was $684.1 million.
- Total long-term debt of $3.2 billion, with $716 million of additional borrowing capacity under the Revolving Loan.
- Repurchased $367.4 million of common stock in 2016; the quarterly dividend was raised to $0.16 per share in November 2016 and declared again in February 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, CDW kept $0.03.
- Revenue$13.67B100.0%
- Cost of revenue−$11.34B83.0%
- Gross profit$2.33B17.0%
- Operating costs−$1.51B11.0%
- Operating income$820.0M6.0%
- Interest, other & tax−$394.9M2.9%
- Net income$425.1M3.1%
Where FY2016 revenue went
$13.67B- Cost of revenue: $11.34B, 83% of revenue
- Net income: $425.1M, 3.1% of revenue
- SG&A: $1.35B, 9.8% of revenue
- Other operating costs: $162.9M, 1.2% of revenue
- Interest, other & tax: $394.9M, 2.9% of revenue
Kept 3.1% as net incomeNet income $425.1M · 3.1%Other operating costs $162.9M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 1, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $13.67B$12.99B | +5.3% |
| Cost of Revenue | $11.34B$10.87B | +4.3% |
| Gross Profit | $2.33B$2.12B | +10.0% |
| SG&A Expenses | $1.35B$1.23B | +9.7% |
| Operating Income | $820.00M$742.00M | +10.5% |
| Net Income | $425.10M$403.10M | +5.5% |
| EPS (Basic) | $2.60$2.37 | +9.7% |
| EPS (Diluted) | $2.56$2.35 | +8.9% |
| Shares Outstanding (Basic) | 163.60M170.30M | −3.9% |
| Shares Outstanding (Diluted) | 166.00M171.80M | −3.4% |
05—Questions
Frequently Asked Questions
How did CDW's revenue and profitability change in 2016?
Net sales rose 7.6% to $13.98 billion, aided by a full year of CDW UK results compared with five months in 2015. Gross profit margin rose 30 basis points to 16.6%, and income from operations increased 10.4% to $819.2 million.
What is the company's exposure to its vendor partners?
The filing says products from Apple, Cisco, Dell, EMC, Hewlett Packard Enterprise, HP Inc., Lenovo and Microsoft represented nearly 60% of 2016 consolidated Net sales. The company has no long-term contracts with its vendor partners, and many arrangements are terminable on notice by either party.
What is the status of the SEC investigation?
On October 29, 2015, the company learned of an SEC investigation into its vendor partner program incentives. The investigation is ongoing, and the company is cooperating. The company does not believe there is a reasonable possibility of a material loss exceeding amounts already recognized.
What capital allocation actions did CDW take in 2016 and early 2017?
The company repurchased 8.7 million shares for $367 million in 2016 and paid $78.7 million in dividends. In February 2017 it priced $600 million of 5.0% Senior Notes due 2025 to redeem its 6.0% Senior Notes due 2022, and it declared a $0.16 quarterly dividend.
06—Continue