CompUSA 2008 Annual Report Download - page 60

25
Results of Operations
Key Performance Indicators (in thousands):
Years Ended December 31,
2008 2007
%
Change 2007 2006
%
Change
Net sales by segment:
Technology products $2,795,441 $2,553,716 9.5% $2,553,716 $2,148,104 18.9%
Industrial products 237,027 225,746 5.0% 225,746 196,860 14.7%
Software solutions 493 413 19.4% 413 201 105.5%
Total net sales $3,032,961 $2,779,875 9.1% $2,779,875 $2,345,165 18.5%
Net sales by geography:
North America $2,092,372 $1,847,477 13.3% $1,847,477 $1,601,259 15.4%
Europe 940,589 932,398 .9% 932,398 743,906 25.3%
Total net sales $3,032,961 $2,779,875 9.1% $2,779,875 $2,345,165 18.5%
Gross margin 15.3% 15.3% - 15.3% 14.6% .7%
SG&A costs $380,778 $332,359 14.6
%
$332,359 $282,189 17.8%
SG&A costs as % of sales 12.6% 12.0% .6% 12.0% 12.0% (.-)%
Operating income $83,367 $93,942 (11.3
)%
$93,942 $60,730 54.7%
Operating margin 2.7% 3.4% (.7)% 3.4% 2.6% .8%
Effective income tax rate 36.9% 30.5% 6.4% 30.5% 35.2% (4.7)%
Net income $52,843 $69,481 (23.9)% $69,481 $45,147 53.9%
Net margin 1.7% 2.5% (.8)% 2.5% 1.9% .6%
NET SALES
Net sales grew 9% to $3 billion driven by growth in both technology and industrial products segments.
Excluding the effects of exchange rate changes, sales would have grown 8%. North American technology
products sales grew 14% to $1.9 billion. Exchange rate changes did not impact full year sales growth.
European technology products sales grew 1% to $940.6 million. Excluding exchange rate benefits,
European sales would have been flat.
Sales increased in all three reporting business segments and in both geographies during 2008 over 2007.
The Technology Products sales increase was driven by increased internet and retail store sales as the
result of the acquisition of the CompUSA ecommerce business and re-opening sixteen retail stores. Sales
attributable to CompUSA web and retail were $226.3 million for the year. Excluding CompUSA revenue,
total Technology Products revenues increased 0.6% compared to the prior year. In the United States,
Technology Products sales excluding CompUSA declined 1.0% for the year. The decline over the year is
the result of slower business to business IT and consumer electronics sales as United States economy
activity slowed in the second half of 2008. In Europe sales increased .9% compared to a year ago.
Movements in foreign exchange rates positively impacted the European sales comparison by
approximately $13 million for the year. Excluding exchange rate benefits, European sales would have
been flat year over year. Sales in Canada (Other North America) increased by 13.9% compared to the
prior year. Excluding exchange rate benefits, sales would have increased 10.9% for the year. The
increased sales are primarily the result of the opening of one additional retail store, increased business to
business and web sales and generally more stable economic conditions in Canada as compared to other
locations. As in the United States, sales slowed in the second half of 2008 in Europe and Canada for both
consumer and business to business sales as the result of a slowdown in economic activity.
The growth in Industrial Products sales resulted from the Company increasing its market share through
aggressive acquisition of customers via web and catalog, increased web advertising by expanding and
refining advertisements for existing product lines and adding new advertising for new product lines via
search engines, shipping engines and vertical market sites.
In our Software Solutions segment, revenues continue to be insignificant relative to consolidated
revenues. In the fourth quarter of 2008, the Company reorganized its Software business to reduce its net