From the Wires
CDW Reports Full Year and Fourth Quarter Results for 2012
By: Business Wire
Feb. 13, 2013 09:01 AM
CDW Corporation, a leading multi-brand technology solutions provider to business, government, education and healthcare, today announced fourth quarter and full year 2012 results.
“2012 marked another year of strategic progress and strong financial performance for CDW,” said Thomas E. Richards, chairman and chief executive officer of CDW. “The power of our five customer channels, each generating more than $1 billion in annual sales, and our portfolio of more than 100,000 products was evident again this year as our sales grew faster than the market. We sustained solid profitability through laser-like focus on sales and operating productivity. These results reinforce the strength of our strategy and demonstrate the talent of our coworkers against a challenging backdrop.”
"Fourth quarter results reflect the same factors that drove our success all year. Our diverse channel portfolio helped deliver an overall increase in sales to Corporate customers as growth in our Medium and Large business channel offset a slight decline in Small business. Public results were led by strong sales to Healthcare and State and Local government customers. Balanced performance inside our product suite helped drive mid-single digit growth in hardware and software sales and high single digit growth in services."
“Strong operating results drove excellent cash flow which enabled us to continue to strengthen our balance sheet,” said Ann E. Ziegler, CDW’s chief financial officer. “Over the past five years, our debt less cash has declined by $869 million from $4.60 billion to $3.73 billion,” added Ziegler.
“We intend to continue to profitably outpace market growth and enhance our financial position in 2013 by following the same formula that delivered our success in 2012. We will leverage the power of our diversified channel and product portfolio and make disciplined investments in our Cloud, Mobility and converged data center solutions. We will continue to drive sales and productivity and judiciously invest in our selling and services capabilities," concluded Richards.
For the year ended December 31, 2012, average daily sales increased 5.9 percent compared to the year ended December 31, 2011. Net sales increased 5.5 percent compared to 2011, reflecting one less selling day in the year ended December 31, 2012. Gross profit increased 5.4 percent for the year, with a gross profit margin of 16.5 percent in both 2011 and 2012. For the year ended December 31, 2012, Adjusted EBITDA increased 6.9 percent and Adjusted EBITDA margin was 7.6 percent of net sales. Year-end coworker count for 2012 was 6,804 versus 6,745 at the end of 2011.
Full Year 2012 Highlights:
Total net sales in 2012 were $10.128 billion compared to $9.602 billion in 2011, an increase of 5.5 percent. Average daily sales in 2012 were $39.9 million compared to $37.7 million in 2011, representing a 5.9 percent increase. There was one less selling day in 2012, with 254 selling days in 2012 versus 255 selling days in 2011.
Gross profit in 2012 was $1.670 billion compared to $1.584 billion in 2011, representing an increase of 5.4 percent. Gross profit margin was 16.5 percent in both 2011 and 2012. The increase in gross profit resulted from higher sales.
Total selling and administrative expenses, including advertising expense, were $1.159 billion in 2012 compared to $1.113 billion in 2011, representing an increase of 4.2 percent. This increase was primarily driven by higher coworker compensation, including variable compensation related to increased sales and gross profit, and advertising.
Adjusted EBITDA was $766.6 million in 2012 compared to $717.3 million in 2011, representing an increase of 6.9 percent. Adjusted EBITDA margin was 7.6 percent in 2012 compared to 7.5 percent in 2011.
Net Income was $119.0 million in 2012, which included an after-tax charge of $10.5 million for debt extinguishment related to the repurchase and refinancing of debt, compared to prior year net income of $17.1 million, which included an after-tax charge of $72.5 million for debt extinguishment. Interest expense for 2012 totaled $307.4 million, 5.2 percent below our interest expense in 2011, reflecting lower debt levels and interest rates. Debt less cash was $3.73 billion at year-end 2012, down $233 million from $3.97 billion at year-end 2011.
Fourth Quarter of 2012 Highlights:
Total net sales in the fourth quarter of 2012 were $2.601 billion compared to $2.479 billion in the fourth quarter of 2011, an increase of 4.9 percent. Average daily sales in the fourth quarter of 2012 were $41.3 million compared to $39.4 million in the fourth quarter of 2011, representing a 4.9 percent increase. There were 63 selling days in both the fourth quarter of 2012 and 2011.
Gross profit for the fourth quarter of 2012 was $425.4 million compared to $412.3 million in the fourth quarter of 2011, representing an increase of 3.2 percent. Gross profit margin was 16.4 percent in the fourth quarter of 2012 compared to 16.6 percent in the same period of 2011, which benefitted from hard disk drive pricing due to supply chain disruption from the flooding in Thailand.
Total selling and administrative expenses, including advertising expense, were $294.5 million in the fourth quarter of 2012 compared to $301.2 million in the fourth quarter of 2011, representing a decrease of 2.2 percent. Lower total selling and administrative expenses in the fourth quarter of 2012 were primarily driven by lower costs related to bonus compensation tied to Adjusted EBITDA.
Adjusted EBITDA was $195.0 million in the fourth quarter of 2012 compared to $174.2 million in the fourth quarter of 2011, representing an increase of 12.0 percent. Adjusted EBITDA margin was 7.5 percent in the fourth quarter of 2012 compared to 7.0 percent in the fourth quarter of 2011.
Net Income was $33.3 million for the fourth quarter of 2012, up from 2011’s fourth quarter net income of $19.0 million. Interest expense was $74.9 million in the fourth quarter of 2012, down 7.4 percent from $80.9 million in the fourth quarter of 2011, reflecting lower debt levels.
Forward Looking Statements
Statements in this release that are not statements of historical fact are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including without limitation statements regarding the future financial performance of CDW. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, among others, CDW’s substantial indebtedness; restrictions imposed by agreements relating to CDW’s indebtedness on its operations and liquidity; changes in economic conditions; decreases in spending on technology products by CDW’s customers; CDW’s relationships with vendor partners and availability of their products; continued innovations in hardware, software and services by CDW’s vendor partners; substantial competition that could reduce CDW’s market share; the continuing development, maintenance and operation of CDW’s information technology systems; potential breaches of data security; potential failures to comply with Public segment contracts or applicable laws and regulations; potential failures to provide high-quality services to CDW’s customers; potential losses of any key personnel; potential interruptions of the flow of products from suppliers; potential adverse occurrences at one of CDW’s primary facilities or customer data centers; CDW’s dependence on commercial delivery services; CDW’s exposure to accounts receivable and inventory risks; future acquisitions or alliances; fluctuations in CDW’s operating results; current and future legal proceedings and audits; and other risk factors or uncertainties identified from time to time in CDW Corporation’s filings with the Securities and Exchange Commission (“SEC”). Although CDW believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Reference is made to a more complete discussion of forward-looking statements and applicable risks contained under the captions “Forward-Looking Statements” and “Risk Factors” in CDW Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC and other subsequent filings with the SEC. CDW undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Information
EBITDA and Adjusted EBITDA are non-GAAP financial measures. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to the company’s operating performance and cash flows including CDW’s ability to meet our future debt service, capital expenditures, and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in the company’s credit agreements. Reconciliations of EBITDA and Adjusted EBITDA to net income for the three months and years ended December 31, 2012 and 2011 are provided in the attached schedules. Non-GAAP measures used by the company may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
CDW is a leading provider of technology solutions for business, government, education and healthcare. Ranked No. 31 on Forbes’ list of America’s Largest Private Companies and No. 270 on the FORTUNE 500, CDW was founded in 1984 and employs more than 6,800 coworkers. For the year ended December 31, 2012, the company generated net sales of $10.1 billion. For more information, visit www.CDW.com.
A live web cast of CDW’s management discussion of the fourth quarter and full year 2012 results will be available at www.cdw.com/investor. The web cast will begin today, February 13, 2013, at 11:00 a.m. ET / 10:00 a.m. CT. An audio replay of the call will also be available at www.cdw.com/investor for approximately two weeks.
Additional financial and operational data is provided in a series of supplemental slides available at www.cdw.com/investor.
CDW is a registered trademark of CDW LLC.
* Not meaningful
(1) Other adjustments include certain retention costs, equity investment income/losses and a litigation loss in the fourth quarter of 2012.
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