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17
Results of Operations
The following table sets forth for the periods indicated information derived from our consolidated
statements of income expressed as a percentage of net sales:
Percentage of Net Sales
Financial Results Years Ended December 31,
2004 2003 2002
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 84.8 85.6 86.8
Gross profit 15.2 14.4 13.2
Selling and administrative expenses 6.7 7.0 6.1
Net advertising expenses 1.6 1.3 0.1
Income from operations 6.9 6.1 7.0
Interest and other income 0.1 0.1 0.2
Income before income taxes 7.0 6.2 7.2
Income tax provision 2.8 2.4 2.8
Net income 4.2 % 3.8 % 4.4 %
The following table sets forth for the periods indicated a summary of certain of our consolidated operating
statistics:
Operating Statistics Years Ended December 31,
2004 2003 2002
Number of invoices processed 6,302,462 5,431,041 4,995,459
Average invoice size $984 $916 $935
% of sales to commercial customers (1) 98.1% 97.9% 97.4%
Sales force, end of period 2,012 1,924 1,320
Annualized inventory turnover (2) 24 24 -
Accounts receivable - days sales outstanding (3) 37 35 29
Direct web sales (000’s) $1,525,712 $1,056,761 $829,233
Net sales per coworker (000’s) $1,504 $1,402 $1,508
Return on shareholders’ equity 21.1% 17.8% 22.8%
(1) Commercial customers is defined as public sector and corporate customers excluding consumers.
(2) Starting in 2004, annualized inventory turnover is computed on an average daily basis. Annualized
inventory turnover for 2003 has been restated using the new method. Due to the inability to recapture daily
inventory information, we were not able to calculate the 2002 statistic using the new method.
(3) The increase in accounts receivable – days sales outstanding is primarily due to a higher percentage of
sales on terms and a larger proportion of accounts receivable from federal government customers, which
typically have a longer pay cycle than corporate customers.