CompUSA 2007 Annual Report Download - page 66

23
Highlights from 2007
The discussion of our results of operations and financial condition that follows will provide information
that will assist in understanding our financial statements and information about how certain accounting
principles and estimates affect the consolidated financial statements. This discussion should be read in
conjunction with the consolidated financial statements included herein.
• Sales increase of 19% in 2007 over 2006
• E-commerce sales increase of 12% in 2007 over 2006
• Operating income increase of 54% in 2007 over 2006
• Net income increase of 54% in 2007 over 2006
• Diluted earnings per share increase of 51% in 2007 over 2006
Results of Operations
Key Performance Indicators (in thousands):
Years Ended December 31,
2007 2006 %
Change 2006 2005
%
Change
Net sales by segment:
Technology products $2,553,716 $2,148,104 18.9% $2,148,104 $1,940,902 10.7%
Industrial products 225,746 196,860 14.7% 196,860 174,616 12.8%
Hosted software 413 201 105.5% 201 - -%
Total net sales $2,779,875 $2,345,165 18.5% $2,345,165 $2,115,518 10.9%
Net sales by geography:
North America $1,847,477 $1,601,259 15.4% $1,601,259 $1,420,881 12.7%
Europe 932,398 743,906 25.3% 743,906 694,637 7.1%
Total net sales $2,779,875 $2,345,165 18.5% $2,345,165 $2,115,518 10.9%
Gross margin 15.3% 14.6% .7% 14.6% 14.5% .1%
SG&A costs $330,797 $281,015 17.7% $281,015 $272,478 3.1%
SG&A costs as % of sales 11.9% 12.0% (.1)% 12.0% 12.9% (7.0)%
Operating income $95,505 $61,904 54.3% $61,904 $34,809 77.8%
Operating margin 3.4% 2.6% .8% 2.6% 1.6% 1.0%
Effective income tax rate 30.5% 35.2% (4.5)% 35.2% 65.2% (30.0)%
Net income $69,481 $45,147 53.9% $45,147 $11,441 294.6%
Net margin 2.5% 1.9% .6% 1.9% .5% 1.4%
NET SALES
Sales increased in all three reporting business segments and in both geographies during 2007 over 2006.
The growth in Technology Products sales was driven by increased internet and retail store sales, private
label product sales and expanded product offerings. The growth in Industrial Products sales resulted from
the Company increasing its market share through competitive pricing advantages and increased internet
sales. The growth in North American sales reflected the above factors in both segments. The growth in
European sales was driven by strong business to business gains and by the effect of a weaker US dollar.
Exchange rates positively impacted the European sales comparison by approximately $78 million in 2007
as compared to 2006. Excluding the movements in foreign exchange rates, European sales would have
increased 12% from the prior year. Sales as measured in local currencies increased in all of the European
markets we serve in 2007. Sales in our Hosted Software segment were not material in 2007 or 2006 due
to early stage of operations.
Sales increased in all three reporting business segments and in both geographies during 2006 over 2005.
The growth in Technology Products sales was driven primarily by increased internet-related marketing
initiatives targeting consumers. The growth in Industrial Products sales resulted from the Company
growing its market share through competitive pricing advantages and increased internet sales. The
growth in North American sales reflected the above factors in both segments. The growth in European