CompUSA 2009 Annual Report Download - page 82

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The higher tax rate in 2008 compared to 2007 is primarily attributable to a higher effective tax rate in the United Kingdom in 2008 as
the result of the reversal of the valuation allowance in 2007. The lower effective tax rate in 2007 resulted primarily from the reversal
of a valuation allowance of approximately $5.9 million against deferred tax assets in the United Kingdom partially offset by the
recording of a valuation allowance of approximately $1.7 million against the deferred tax assets of Germany. The United Kingdom
valuation allowance, originally recorded at $10.2 million, had been established in 2005 as the result of a cumulative loss position in
the United Kingdom
During 2009, 2008, and 2007, we did not recognize certain foreign tax credits, certain state deferred tax assets in the United States and
certain benefits on losses in foreign tax jurisdictions due to our inability to carry such credits and losses back to prior years and our
determination that it was more likely than not that we would not generate sufficient future taxable income in those tax jurisdictions to
realize these assets. Accordingly, valuation allowances were recorded against the deferred tax assets associated with those items. If we
are able to realize all or part of these deferred tax assets in future periods, it will reduce our provision for income taxes by a release of
the corresponding valuation allowance.
Seasonality
As the Company’ s consumer channel sales have grown significantly in the past few years, the fourth quarter has represented a greater
portion of annual sales than historically. Net sales have historically been modestly weaker during the second and third quarters as a
result of lower business activity during those months. The following table sets forth the net sales, gross profit and income from
operations for each of the quarters since January 1, 2007 (amounts in millions).
Quarter Ended
March 31 June 30 September 30 December 31
2009
Net sales $ 752 $ 722 $ 754 $ 938
Percentage of year’ s net sales 23.8% 22.8% 23.8% 29.6%
Gross profit $ 108 $ 107 $ 113 $ 132
Operating income $ 15 $ 9 $ 19 $ 30
2008
Net sales $ 725 $ 756 $ 739 $ 813
Percentage of year’ s net sales 23.9% 24.9% 24.4% 26.8%
Gross profit $ 114 $ 115 $ 115 $ 115
Operating income $ 26 $ 21 $ 20 $ 16
2007
Net sales $ 676 $ 647 $ 687 $ 769
Percentage of year’ s net sales 24.3% 23.3% 24.7% 27.7%
Gross profit $ 97 $ 99 $ 111 $ 120
Operating income $ 22 $ 20 $ 24 $ 28
Financial Condition, Liquidity and Capital Resources
Selected liquidity data (in thousands):
December 31,
2009 2008 $ Change
Cash $ 58,309 $ 115,967 $ (57,658)
Accounts receivable, net $ 241,860 $ 182,841 $ 59,019
Inventories $ 365,725 $ 290,594 $ 75,131
Prepaid expenses and other current assets $ 20,066 $ 12,667 $ 7,399
Accounts payable $ 346,362 $ 285,410 $ 60,952
Accrued expenses and other current liabilities $ 80,945 $ 72,352 $ 8,593
Current portion of capitalized lease obligations $ 1,029 $ 773 $ 256
Short term debt $ 14,168
—
$ 14,168
Working capital $ 250,082 $ 253,092 $ (3,010)
Our primary liquidity needs are to support working capital requirements in our business, including working capital for new retail
stores, to fund capital expenditures, to fund the payment of interest on outstanding debt, to fund special dividends declared by our
Board of Directors and for acquisitions. We rely principally upon operating cash flow to meet these needs. We believe that cash flow
from operations and our availability under credit facilities will be sufficient to fund our working capital and other cash requirements