Tech Data 2014 Annual Report Download - page 28

Table of Contents
In addition, approximately 13% and 12% of our consolidated net sales in fiscal 2014 and 2013 were from products purchased from Apple, Inc.
There were no other vendors that accounted for 10% or more of our consolidated net sales in the past three fiscal years.
Gross Profit
Gross profit as a percentage of net sales (“gross margin”) during fiscal 2014 was 5.08% compared to 5.14% in fiscal 2013. The slight decline in
our year-over-year gross margin is primarily attributable to product mix changes and a competitive environment, particularly in the Americas.
Gross margin during fiscal 2013 was 5.14% compared to 5.37% in fiscal 2012. 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.
Operating Expenses
Selling, general and administrative expenses (“SG&A”)
SG&A as a percentage of net sales increased to 4.16% in fiscal 2014, compared to 3.98% in fiscal 2013. The increase in SG&A as a percentage
of net sales compared to the prior year is primarily attributable to the impact of the acquisition of SDG in the fourth quarter of fiscal 2013 and
the lack of leverage resulting from lower sales in our legacy operations in Europe. In absolute dollars, SG&A increased $106.7 million in fiscal
2014 compared to fiscal 2013 primarily due to the SDG acquisition. SG&A as a percentage of net sales during the fourth quarter of fiscal 2014
was 3.61% compared to 4.40% for the first nine months of the fiscal year. The increase in operating leverage is primarily due to seasonal
variations, including an increase in European demand during our fiscal fourth quarter.
SG&A as a percentage of net sales decreased to 3.98% in fiscal 2013, compared to 4.07% in fiscal 2012. 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.
Restatement
-related expenses and LCD settlements, net
Restatement-related expenses primarily include legal, accounting and third party consulting fees associated with (i) the restatement of certain of
the Company's consolidated financial statements and other financial information from fiscal 2009 to fiscal 2013, (ii) the Audit Committee
investigation to review the Company's accounting practices, (iii) supplemental procedures to assist in reviewing the Company's financial
statements and accounting practices, and (iv) other related activities. During fiscal 2014, the Company incurred restatement-related expenses of
approximately $53.8 million. The Company expects to incur restatement-related expenses during fiscal 2015 in connection with continuing to
perform supplemental procedures to assist in reviewing its financial statements, accounting practices and in connection with other restatement-
related activities.
Additionally, the Company has been a claimant in proceedings seeking damages from certain manufacturers of LCD flat panel displays. During
fiscal 2014, the Company reached settlement agreements with certain manufacturers in the amount of $35.5 million, net of attorney fees and
expenses.
Value Added Tax Assessment
Prior to fiscal 2004, one of our subsidiaries in Spain was audited in relation to various value-added tax ("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 appellate court opinion
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, 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 13 of
Notes to Consolidated Financial Statements for further discussion).
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 VAT receivables, and $3.1 million
25