Tech Data 2013 Annual Report Download - page 29

Table of Contents
however, was largely offset by strong sales performance in other European markets, such as Germany, U.K., France and the Netherlands.
Gross Profit
Gross profit as a percentage of net sales (“gross margin”)
during fiscal 2013 was 5.14% compared to 5.37% in fiscal 2012 and 5.41% in fiscal 2011.
The decrease in our year-over-year gross margin is primarily due to a higher mix of lower margin mobile phones, tablets and software, as well as
the aforementioned effects from our implementation of certain SAP modules in the U.S. during the second quarter of fiscal 2013. In addition, our
fiscal 2013 gross margin was also impacted by a highly competitive selling environment in many of the countries in which we operate.
Operating Expenses
Selling, general and administrative expenses (“SG&A”)
SG&A as a percentage of net sales decreased to 3.98% in fiscal 2013, compared to 4.07% in fiscal 2012. During fiscal 2013, our year-over-year
improvement in operating leverage was primarily driven by our ability to manage costs while delivering sales growth in Europe, offset by a decline
in operating leverage in the United States due to the implementation of certain modules of SAP in the U.S., as previously discussed above. In
absolute dollars, SG&A decreased $34.7 million in fiscal 2013 compared to fiscal 2012. The decrease in SG&A during fiscal 2013 is primarily
attributable to the weakening of certain foreign currencies against the U.S. dollar in fiscal 2013 and the closure of our in-country operations in
Brazil and Colombia in the fourth quarter of fiscal 2012, partially offset by increased costs incurred to support our sales growth in Europe and the
impact of the SDG acquisition in the fourth quarter of fiscal 2013.
SG&A as a percentage of net sales increased to 4.07% in fiscal 2012, compared to 4.05% in fiscal 2011. The relative stability of our SG&A as a
percentage of net sales during fiscal 2012 compared to the prior year is primarily the result of increased costs incurred related to acquisitions and to
support our sales growth and diversification strategies being largely offset by operating leverage on the increase in net sales and cost savings
initiatives during both fiscal 2012 and 2011. In absolute dollars, SG&A increased $87.8 million in fiscal 2012 compared to fiscal 2011. The
increase in SG&A during fiscal 2012 is primarily attributable to the impact of the acquisition of Triade in the third quarter of fiscal 2011, the
strengthening of certain foreign currencies against the U.S. dollar, increased costs incurred to support our sales growth and diversification
strategies, and increased severance costs in Europe resulting from a realignment of resources in the region during the fourth quarter of fiscal 2012.
Loss on Disposal of Subsidiaries
We incurred losses of $28.3 million during fiscal 2012 as a result of closing the Company’s in-country commercial operations in Brazil and
Colombia. The loss on disposal of these subsidiaries includes a $9.9 million impairment charge on the Company’s investments in Brazil and
Colombia due to a foreign currency exchange loss (previously recorded in shareholders’
equity as accumulated other comprehensive income), $15.3
million related to the write-off of certain value-added tax ("VAT") receivables, and $3.1 million comprised primarily of severance costs, fixed asset
write-offs and lease termination penalties. These costs do not include any estimated costs associated with the Brazilian subsidiary’s contingencies
related to CIDE and other non-income related tax examinations. The operating losses of Brazil and Colombia for the fiscal year ended January 31,
2012, were not significant to the Company’s consolidated operating results (see Note 7 and Note 14 of Notes to Consolidated Financial Statements
for further discussion).
Value Added Tax Assessment
Prior to fiscal 2004, one of our subsidiaries in Spain was audited in relation to various VAT matters. As a result of those audits, the subsidiary
received notices of assessment that allege the subsidiary did not properly collect and remit VAT. During the fourth quarter of fiscal 2014, an
appellate court issued an opinion upholding the assessment for several of the assessed years. The opinion represents a subsequent event that
occurred prior to the issuance of the fiscal 2013 financial statements in relation to a loss contingency that existed as of January 31, 2013. As a result
of this subsequent event, which is unrelated to the restatement discussed in Note 2 of Notes to Consolidated Financial Statements, we recorded a
charge of $29.5 million to increase our accrual as of January 31, 2013 to cover the assessment and penalties (see Note 14 of Notes to Consolidated
Financial Statements for further discussion).
Interest Expense
Interest expense decreased 4.0% to $30.1 million in fiscal 2013 compared to $31.4 million in fiscal 2012. The decrease in interest expense in fiscal
2013 in comparison to fiscal 2012 is primarily attributable to the repayment of the $350.0 million, 2.75% convertible senior debentures in
December 2011 and the use of the Company's available cash and revolving credit facilities at lower rates of interest throughout fiscal 2013, partially
offset by the $350.0 million, 3.75% Senior Notes issued in September 2012
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