Adaptec 2001 Annual Report Download - page 20

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20
Gross Profit ($000,000)
Total gross profit for 2001 decreased by $343.0 million, or 65%, from gross profit in 2000. In
contrast, 2000 gross profit was higher than gross profit in 1999 by $306.2 million, or 138%.
Networking
Our networking gross profit decreased by $339.6 million in 2001. Over 80% of this dollar
decrease was due to the reduction in our networking sales volume.
Our networking gross profit as a percentage of netw orking revenues decreased 18 percentage
points from 77% in 2000 to 59% in 2001. This decrease resulted from the following factors:
• a $20.7 million write-down of excess inventory which lowered gross profit by 7 percentage
points,
• a shift in product mix towards lower margin products, which lowered gross profit by 6
percentage points, and
• the effect of applying fixed manufacturing costs over reduced shipment volumes which
lowered margins by 5 percentage points.
The $20.7 million write-down for excess inventory, w hich we recorded in cost of revenues,
consisted of a $2.1 million charge in response to the cancellation of certain of our customers’
programs plus a charge of $18.6 million for inventory levels in excess of estimated 12-month
demand (see “ Critical Accounting Policies and Significant Estimates” ).
Our networking gross profit increased by $301.3 million in 2000 due to increased sales volumes
but did not change as a percentage of networking revenues betw een 1999 and 2000.
Non-networking
Non-networking gross profit as a percentage of non-networking revenues decreased to 42% in
2001 from 44% in 2000 and 46% in 1999 due to a reduction in the selling price of our non-
networking product.
2001 Change 2000 Change 1999
Networking products $176.1 (66%) $515.7 141% $214.4
Percentage of networking revenues 59% 77% 77%
Non-networking products $9.4 (27%) $12.8 62% $7.9
Percentage of non-networking revenues 42% 44% 46%
Total gross profit $185.5 (65%) $528.5 138% $222.3
Percentage of net revenues 57% 76% 75%