CompUSA 2008 Annual Report Download - page 1

Proxy Statement and
2008 Annual Report to Stockholders
Dear Fellow Stockholders,
When I wrote to you a year ago, we had just completed the greatest year in our Company’s history. Our core business
segments – Technology Products and Industrial Products – both reported all-time records during 2007 in both revenues
and operating income. We had just completed the CompUSA acquisition and were hard at work on integration. Our
significant investment since the early 2000s in the Hosted Software business appeared to be on the verge of paying off
with anticipated go-lives of several large external customers. We had some concerns about the macro economic climate,
but the storm clouds appeared to be distant and not too dark. Now, a year later, things look very different – in both our
internal business segments and the external macroeconomic climate, which quite frankly is unlike anything we could have
reasonably foreseen. While we believe the current business environment is the most challenging in several generations,
we also believe it is presenting our Company with unprecedented growth opportunities. I will outline below some of the
key accomplishments and disappointments in each of our business segments below.
Consolidated Company
During 2008, our revenues grew by 9% to over $3.0 billion; our operating income was $83 million; our net income was
$53 million, or $1.41 per diluted share; our operating cash flow was $82 million and we paid our second special dividend
of $1.00 per share. As of December 31, 2008, our working capital was over $250 million; we had no debt outstanding
other than small capitalized leases; our $120 million credit facility was undrawn; and our stockholders’ equity was $334
million. We remain a profitable company and our balance sheet is strong and liquid. Although our 2008 final results fell
short of our expectations, I am extremely proud of our financial performance (in light of the economy); our strategic
accomplishments; the strength of our balance sheet and our overall strategic positioning in our industries.
Technology Pro d u c t s
The major event during 2008 was the CompUSA acquisition. We acquired the ecommerce business (compusa.com URL,
trademarks and tradenames, customer names/addresses and miscellaneous other intangible assets) and closed on the
acquisition during January. We immediately launched our new compusa.com website with our new products, content and
approach to ecommerce. We assumed leases on 16 of old CompUSA’s over 200 brick and mortar retail store locations
during February and March. Upon receiving the keys to the stores, we cleaned them up, filled them with inventory from
our distribution center, installed point of sale equipment, and hired and trained hundreds of associates from the local
markets to work in and manage the stores. We opened the stores generally one to two weeks after receiving the keys from
old CompUSA and steadily have increased customer traffic since then. We also conceptualized our revolutionary Retail
2.0 merchandising approach and deployed it successfully to our flagship Dadeland location. The combined CompUSA
ecommerce and retail operations generated significant sales revenue during 2008 and were profitable, but they are not yet
at the levels they are capable of producing. During 2009, we are rebranding all existing TigerDirect retail stores in the
U.S. under the CompUSA brand; opening “B2B” call centers in Texas, Idaho and South Dakota; continuing the rollout of
Retail 2.0 to more stores, and implementing a new point of sale solution for all of our retail stores to improve operating
e ff i c i e n c y.
In our TigerDirect business, we saw mixed results during the year in our various sales channels. Our core Ti g e r D i r e c t . c o m
“B2C” web business continued to grow successfully, and it continues as one of the top rated ecommerce sites for
computers and consumer electronics in the United States. Our TigerDirect “B2B” business had mixed results, impacted
by a general slowdown in corporate purchasing late in the year. Our TigerDirect retail stores continued to show strong
growth and profitability.