Circuit City 2005 Annual Report Download - page 21

Results of Operations
We had net income of $11.4 million for the year ended December 31, 2005, $10.2 million for the year ended
December 31, 2004 and $3.2 million for the year ended December 31, 2003.
The following table represents our consolidated statement of operations data expressed as a percentage of net
sales for our three most recent fiscal years:
NET SALES
Net sales were $2.12 billion for the year ended December 31, 2005, an increase of 9.7% from $1.93 billion for
the year ended December 31, 2004. Net sales in 2005 included approximately $650 million of internet-related sales, an
increase of $135 million, or 26%, from 2004. North American sales increased to $1.42 billion, a 15.3% increase from
last year’s $1.23 billion. The increase in North American sales resulted primarily from growth in both our computer
and computer-related products and our industrial products. Sales in our computer products segment increased 15.3% to
$1.25 billion from $1.08 billion in 2004. This increase was largely a result of our successful internet-based marketing
initiatives directed primarily at our consumer customers as reflected by an increase in our internet-related sales of
approximately $100 million. Although our internet-
related sales are not exclusively made to consumers, we believe that
a large majority of these sales are made to consumers. We continued to see strong growth in our industrial product sales
in 2005. Sales of industrial products increased 15.2% to $174.6 million from $151.6 million last year, representing 12%
of the overall increase in North American sales. European sales, stated in US dollars, decreased 0.2% to $694.6 million
for 2005 (representing 32.8% of worldwide sales) compared to $695.7 million (representing 36.1% of worldwide sales)
in the year-ago period. Movements in foreign exchange rates positively impacted European sales for 2005 by
approximately $5.8 million. If currency exchange rates for 2004 had prevailed in 2005, however, European sales would
have decreased 1.0% from the prior year. Continued weakness in demand for information technology products from
business customers in Europe and the effect of exchange rate movements on product pricing in certain European
markets for products whose cost is U.S. dollar based, resulted in decreased local currency denominated sales.
Some European economies began to recover during 2005 and we saw our sales begin to improve in those
markets as measured in local currencies. However, on a combined basis, our European sales as measured in local
currencies declined in 2005. The table below reflects European sales for the three years as reported in this report at
then-current exchange rates and at constant (2003) exchange rates (in millions):
Net sales were $1.93 billion for the year ended December 31, 2004, an increase of 16.5% from $1.66 billion for
the year ended December 31, 2003. Net sales in 2004 included approximately $515 million of internet-related sales, an
increase of $131 million, or 34%, from 2003. North American sales increased to $1.23 billion, a 20.3% increase from
$1.02 billion in 2003. The increase in North American sales resulted primarily from growth in both our computer and
computer
-
related products and our industrial products. Sales of computer and computer
-
related products increased
2005
2004
2003
Net sales
100.0%
100.0%
100.0%
Gross profit
14.5%
14.9%
16.0%
Selling, general and administrative expenses
12.7%
13.5%
15.2%
Restructuring and other charges
0.2%
0.4%
0.1%
Goodwill impairment
0.2%
Income from operations
1.6%
1.0%
0.6%
Interest expense
0.1%
0.2%
0.1%
Provision for income taxes
1.0%
0.3%
0.3%
Net income
0.5%
0.5%
0.2%
2005 2004 2003
European sales as reported
$694.6
$695.7
$631.0
European sales at 2003 exchange rates
$616.7
$626.1
$631.0